“Smart men go broke three ways – liquor, ladies and leverage.” Charlie Munger<\/p>\n
\u201cMy partner Charlie says there is only three ways a smart person can go broke: liquor, ladies, and leverage. Now the truth is, the first two he just added because they started with \u2018L\u2019 \u2013 It\u2019s leverage.\u201d Warren Buffett<\/p><\/blockquote>\n
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Buffett\u2019s formula\u2014buy quality, use modest leverage, hold forever\u2014sounds simple. But for most retail investors, it\u2019s deceptively difficult to replicate in practice. Here\u2019s why.<\/p>\n
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First, access to low-cost, patient capital is rare. Buffett\u2019s use of insurance float\u2014essentially getting paid to borrow\u2014gives him a structural advantage. Most investors can\u2019t borrow at 1\u20132% over decades. Margin loans are expensive and risky, especially during market stress when brokers raise rates or issue margin calls.<\/p>\n
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Second, behavioural discipline is critical. Buffett holds through massive drawdowns\u2014like 2008\u2014without panic selling. Retail investors, by contrast, often chase performance, sell at lows, and overtrade. The strategy works only if you can stomach multi-year underperformance and stay the course.<\/p>\n
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Finally, the math of leverage cuts both ways. While 1.6x leverage boosts returns in good years, it magnifies losses in bad ones. Without Buffett\u2019s temperament and balance sheet flexibility, most investors risk ruin.<\/p>\n
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The takeaway? Buffett\u2019s edge isn\u2019t just what he buys\u2014it\u2019s how he holds, funds, and thinks. The strategy is sound in theory, but requires rare levels of capital access, conviction, and emotional control to execute successfully.<\/p>\n
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When It\u2019s Time to Pack Your Bags<\/h3>\n
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In the mid-1990s, after India opened its economy to foreign investment, the American luggage maker Samsonite decided to foray into the country. India\u2019s luggage market had been changing for many years, from metal trunks and cloth or leather holdalls to leaner, lighter and more contemporary products such as suitcases and handbags.<\/p>\n
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Samsonite spotted a growth opportunity. It had by then become the world\u2019s largest luggage maker, thanks in part to its acquisition of American Tourister. But it couldn\u2019t crack the India market for several years because of a local company. That company was VIP Industries Ltd.<\/p>\n
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Led by its founder Dilip Piramal, VIP had near-total dominance of the market until the 1990s. Samsonite initially tried to forge a joint venture with VIP. When that plan didn\u2019t go anywhere, it formed a partnership with another local businessman, Ramesh Tainwala, who later became Samsonite\u2019s India CEO and is credited with the US company\u2019s success.<\/p>\n
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Cut to 2025, the 75-year-old Piramal this week decided to hang up his boots and sell a controlling stake in VIP to a consortium of investors led by Indian private equity firm Multiples Alternate Asset Management. The investor group, which also includes Enam Group\u2019s Akash Bhanshali, and CaratLane founder Mithun Sacheti, will buy a nearly 32% stake in VIP for about Rs 1,763 crore while Piramal will retain around 20%.<\/p>\n
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Why is it important? Well, for one, it highlights the decline of an industry titan. But perhaps more importantly, it showcases a new path for Indian family-run businesses to resolve succession issues.<\/p>\n
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<\/p>\n But what made Piramal sell control of a company he started more than 50 years ago? You see, VIP has been gradually losing market share for the past two decades, thanks not only to competition from Samsonite and Safari Industries but also due to cheap Chinese imports and local unorganised segment players.<\/p>\n <\/p>\n In recent years, especially after the travel sector rebounded from the Covid-era restrictions, VIP has lost even more market share. Its revenue has stagnated for three years in the Rs 2,000-2,200 crore range and it swung to a loss in 2024-25. Meanwhile, Samsonite, Safari and several new-age brands such as Uppercase, Mokobara and Nasher Miles are making their mark among the younger generation or those looking for more stylish or contemporary products.<\/p>\n <\/p>\n In 2024, for instance, VIP\u2019s revenue market share was 38% while Safari held 32% and Samsonite 30%. In 2020, VIP\u2019s share was 47% and the other two controlled 53%, according to an investor presentation. This reflects in the stock market performance. Even though Safari is smaller by revenue, its market capitalisation of Rs 10,845 crore is more than a third higher than VIP\u2019s Rs 6,742 crore. This gap widens considering that the Piramal-Multiples deal was struck at Rs 388 per share, compared with its current price of around Rs 475, and valued the company at around Rs 5,500 crore.<\/p>\n <\/p>\n To his credit, Piramal hasn\u2019t tried to shirk responsibility. He admits the company has been facing several challenges and needs fresh blood to steer it out of the crisis. Couldn\u2019t his children do the job? Well, his daughter Radhika, who took over in 2008 and is currently vice chairperson, did try to turn things around and even managed to do so for some time.<\/p>\n <\/p>\n But Piramal realises it\u2019s time to hand over the reins to someone else. And that\u2019s a lesson for India Inc., where a majority of businesses are run by families and passed on from one generation to another even when they are publicly listed or hire professional CEOs. As Piramal admitted, and some industry observers have previously noted, many members of the younger generation are not interested in running family businesses. Piramal\u2019s decision shows them the path forward.<\/p>\n <\/p>\n tl;dr<\/strong> Hear the article in brief instead? <\/p>\n\n![\"SIP_Kuvera\"](\"https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2025\/05\/sip-01.png\")
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