When facts change, I change my mind: Aswath Damodaran on Zomato valuation
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Subscribe to enjoy similar stories. Mumbai: Known as the ‘Dean of Valuation’, Aswath Damodaran, professor of finance at the Stern School of Business at New York University, is out with a new book, The Corporate Life Cycle. Companies have a life cycle very much like humans—they are born, witness growth spurts, mature and then inevitably decline.
And just like some of us, they try to fight aging. Companies employ a host of techniques like acquisitions and hiring expensive consultants in an effort to reincarnate themselves. However, Damodaran argues that all these endeavours inescapably come to naught.
A company like Apple or Microsoft being able to turn around its fortunes is very much the exception which proves the rule. Understanding the corporate life cycle and where every company fits in the framework is crucial for everyone in the chain, from managers to investors. In a wide-ranging interview with Mint, Damodaran talked about assessing family-run businesses, the current dynamics of the Indian stock market, and how investors can optimize their portfolios through the corporate life cycle architecture.
He also revisited his assessment of Zomato, which he valued at ₹42 a share at the time of its listing and which has soared to more than ₹250 now. “When facts change, I change my mind," he said, quoting John Maynard Keynes. Edited excerpts of the interview: Companies are organisms run by individuals.
So like individuals, companies age and also they fight aging. They want to be young again. They do acquisitions, they get consultants.
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