Chandrakant Sampat: The magician of D-street

Veteran stock market investor Chandrakant Sampat is regarded by many as the Warren Buffett of India. The 82 year old investor leads an active yet simple life that includes daily jogging and yoga exercises.  

He has got an acute sense of the economy giving him an edge over others. In a freewheeling chat with CNBC Awaaz's managing editor Sanjay Pugalia, the media shy Samat opens up about his personal triumphs and his views on various issues.    Below is a verbatim transcript of the interview. Also watch the video. Q: What are the top tips investors should keep in mind while investing?  A: When I started somewhere in 1955, it was the controller of capital issue, which was in-charge. It was his duty to see that the companies, who needed capital or who came for the capital, unloaded the investment on the public at a very reasonable price. The value was the whole focus of the controller of capital issue. That kind of an advantage we do not have now. Second, 1955 to 2000 was a period of great stability in which you could visualise what may come about. So, you could take a stand for a longer period for compounding of your wealth. Q: How do you identify good companies from the bad ones? A: Look out for four things. One is least capital expenditures. Two is since there is least capital expenditure, there are no borrowings. That means there are no future costs that are not provided for. Three is the return on capital employed should not be less than 25%. Then it adds to the fourth that these companies give a big chunk of their earnings as a dividend. Let us look at it this way: The Dow has compounded at 5% in the last 100 years, but the good dividend paying companies have done the other way. They have done 8.5%. So, dividends are more important. It is real cash flow in the hands of the shareholders. All this, what you call innovations in the form of bonus