Methinks every Indian Equity Investor needs a dose of Rakesh Jhunjhunwala (RJ) every few years! ~ any sooner it could be an Overdose ! 😆 ~ just kidding !
I like the guy ! ~ right since I interacted with him when I invited him around 15 years ago at the turn of this century for interacting in an evening Q & A session with my packed class of @ 90 participants in my Equity Portfolio Structuring and Stock Analysis Workshop at the BSE Training Institute as I thought he would add practical value & he did
“Boss ! I’m a Sadak Chaap ! ” he had told us then as also how he had reconstructed his equity portfolio to concentrate only in a few stocks after the 2000 ICE debacle…so in a sense most of his Wealth has grown only in this Millennium in the past 15 years ~ and to his credit in Selections that were not really Blue Chip or Core
Yesterday had gone for an IMC interactive meet in Mumbai to check out if RJ has sobered & matured in his ‘manner of speak’ over the years ~ I rarely watch Stock Channels ~ don’t even have a TV in office~ so was not really conversant with how & what he delivered in his appearances though knew of his initiating big stakes in companies
I am delighted to blog he has not changed ! ~ shot straight from the hip & mouth again as he always does ” I’m a satodia(translated to mean speculator) & investor & not an economist” ~ his investment portfolio has spread into the Alternatives of Bollywood Movie Production too with Kareena & Arjun starrer ‘Ki & Ka’ being his latest co production~ is into horse racing too and owns a few horses ~ passions perhaps where return on investments need not be measured in monies !?
Many perceive him as Dehati or Crude Dude for his rustic loud boorish way of speech~ but don’t let it fool you ! & he does not make any pretenses ~ he’s a CA by training & wears a fairly sharp mind
Money Talks & Crowd Laps it up all !~ many vigorously & ‘knowledgeably’ nodding in agreement
These RJ’s views & responses to questions posed should interest you :
On The Future of Equity Markets ~ Reiterates this is only the Trailer & we are going to witness a Mother of all Bull Runs.India is a thriving young Democracy with US $ 600 b in Savings every year.Equity Markets receive just US $ 50 b from this.This has to improve and it will ~ anyone ,any doubt!?
On Returns from Equity ~ Ironically while his riches have been through multibagger 1000% + equity gains in concentrated high weightage stocks like Titan & Crisil he asserts that one should be happy with 18% CAGR gains and if it goes to 24% one should be really happy
On Concentration of his Wealth ~ all his wealth ,he’s a Billionaire in US $, comes from the Value of his Direct Equity Investments & he’s been lucky with them~ Titan has a huge weightage ~ he revealed he hardly has Rs 50000 in Fixed Deposits and some in PPF & of course some in Real Estate
On favourite Sector & Stock ~ Real Estate & DLF ~ sector will recover strong in the coming 4 years & DLF has a free float market cap of under Rs 5000 crs & full of just over Rs 22000 crs at Price of Rs 124 (FV Rs 2)~ Residential Property he picked up at 2000/sq ft in Mumbai is now Rs 50000/sq ft & if GDP is growing and India is evolving as a democracy then it’s a matter of time again for real estate to grow again ~ he’s into Anant Raj,Prozone Intu,DLF & DB Realty
Other Sectors he favours ~ IT & Pharma ~ IT is a great Value add with US $ 80 b from the US $ 120 b exports coming into the country while Oil & Gas Exports of US $ 100 b contributes just US $ 10 b of value add ~ he’s into Polaris,Geometric,Firstsource & Lupin & Aurobindo
A huge case for Defense Sector ~ is betting that in the next 10 years India will become a net exporter of Arms ~ he’s into Reliance Defense (earlier known as Pipavav)
What sectors to avoid ~ Those that don’t contribute to the Economy ~ my view- thought this was a bit flippant response considering that every economic activity adds to the Economy !
On NPAs in PSU Banks ~ Not to gung-ho on PSU Banks though ex SBI chairman A K Purvar,who was there too (left of RJ when viewing pic),opined that the recovery is just a matter of time as most NPAs were for Infrastructure Capex spending & some resumption of project work was being seen ~ to this RJ responded this would be correct and cited that it was wrong decision to cancel all Coal Mine allotments ~ cited an example of Jindal Steel ~ Company invests Rs 4000 crs in the Mine only to see the allocation cancelled because of the controversy on the allotments process ~ RJ favoured penalising the companies rather than cancellation of allocation as all such spend now cannot be recovered and lending Banks will suffer NPAs on such projects ~ my view- I disagree with RJ’s view as it would mean regularising all wrongs,like going ahead blatantly and building extra FSI and more Floors than permission granted and then regularising the same thus paying peanuts in penalties while earning additional hundreds of crores ~ also it was Supreme Court that overturned all Coal Mine Allocations
On Owning an Airline ~ RJ sometimes charters flights and finds it cheaper than owning the airline which runs on high financial leverage like he discovered of a company whose plane he chartered for a flight to Ahmedabad ~ he does have exposure to Spicejet & Jet Airways though
On Modi as PM ~ he’s fighting vested interests but Change is coming & nation is evolving. PM says’ Make in India’ while RBI Gov Raghuram Rajan makes it ‘Make for India’ implying a domestic consumption story too ~my view – clearly RJ believes in Modi & his governance to lead India to superpower status
On Arvind Kejriwal ~ the guy’s a …. 👿 ~ will promise anything~even a bridge where there is no river !
On Nitish Kumar ~ a good administrator but prohibition will not work in Bihar 🙂
On what would he do as PM for a day ~ jocularly remarked give me a day with Aishwarya Rai & I’ll tell you 😛 ~ Really ! RJ?
On Warren Buffett’s wit ~ says he met him once in Delhi & was introduced to him as the ‘Warren Buffett of India’ to which Buffett had wittily responded “Hope that does not make me the Rakesh Jhunjhunwala of USA!”
On E-commerce & Start Ups ~ Hates their Obscene Valuations and the hiccups have already started in the Food Delivery Start Ups ~ Of course E-Commerce will grow but companies will compete on low margins and many will make losses ~ Valuations will halve soon
On Growth Risks/Hurdles in India ~ Bureaucracy,Over Regulation & Crony Capitalism ~ Cannot resolve all issues overnight but Change is coming and less & less these are being seen as hurdles in the ease of doing business
Global Risk ~ Islamic Nuclear Bomb & ISIS ~ what if the Nuclear Bomb came into the hands of unstable people and countries ~ India is a mature self developed nuclear nation which has never peddled it’s nuclear technology unlike Pakistan ~ what if someone burst a ‘Dirty’ Bomb in Manhattan!?
On GDP Growth in India ~ it has always grown every decade since Independence from 2% average in the 1950’s to 60’s & progressively upward and should reach double digit in years ahead
On Corporate Earnings ~ If GDP Grows well it would be because of growth in Corporate Earnings and the PE Equation will see higher market Prices.Tax Collections are also Rs 7 lakh Crs & growing despite Rates falling ~ indicating Earnings growth
On Tax Heaven for Indian Equity Investments ~ When he was asked in Dubai to define ‘Income Tax’ he had remarked that even he could perhaps state he does not know ! ~ for currently Dividends & Long Term Gains are exempt from Tax in the hands of the recipient while Short Term Gains are taxed at just 15%.Even Income Tax rates have come down from 35% and Wealth & Gift Tax clauses diluted ~ If someone in the 1980s when he was studying for CA had spoken of this scenario he would have said “Jump off a cliff!”
On Debt Asset Class ~ Invest in Government of India 30 year Bonds.Interest Yields will drop from current 7.8% to 6.4% and will thus give 16% to 18% returns
On UK & US ~ They are democracies for over hundreds of years while India is under 70 years old and is evolving .It is our turn…London was build on ‘chusing’ (translated to mean exploiting) India & as an Indian, RJ emotes strongly on this though says he does not mix his patriotism with reality.India will become a superpower
On China ~ Yet likes it despite slowing growth unless it blows up on Social Unrest ~ little is known ~ like how USSR collapsed and little was known about it before it did
On Fertilser Subsidies ~ What a waste! ~ Government should spend this monies on Irrigation instead of Fertiliser Subsidies
On Insider Trading ~ “Is anybody even aware there is a law on it ! ~ It’s pretty strict ~ even when wife Rekha asks me about Aptech and I tell her it would construe Insider Trading !”
On SEBI ~ They are evolving too though over regulation is seen in a few areas.However India is well regulated market and is growing because of this as it attracts Funds
On the Indian Rupee ~ will continue to depreciate slowly against the US $
On Unemployment Challenges ~ not unduly concerned ~ cited that he had employed his driver in 1989 at Rs 1200 pm and now he was getting Rs 23000.His friend was willing to pay Rs 30000 for him ! ~ There is a scarcity of Drivers in Mumbai ~ for that matter even plumbers ~ so for those willing to be gainfully employed in such skills there is enough scope
On his daily routine ~ people don’t believe he is simply reading a book in office !
On the Companies Act ~ Says wife and him have been wise to operate as individuals and a partnership and not as a company otherwise he would be subject to so many regulations and compliances ~ Companies Act in India is the largest in the world ! & the only time he needs to read it is when he dons his hat for Aptech !
On Over-regulation ~ A few years ago a Foreigner played Bridge at Willingdon Club and lost.An Indian Member paid up for him & was fined for paying for the expenses of a foreigner ! ~ Point was made but am sure RJ was ‘making believe’ with this illustration ~ as a member of this Club I’m not aware of any such incident
On Stock Tips ~ RJ loves to talk on markets & stocks as much as he loves his whiskey with Geoffreys being his regular tippling point ~ and he’s partial to pretty girls who come up and ask for a tip but who exclaim “bus?’ (translated to mean ‘that’s all?) when he gives them a stock that will double in three years ! ~ Just over a month ago I had met his sister at a small dinner bash ~ a mini school reunion of sorts ~ just 10 of us ~ same school the Ambani Brothers attended ,if it is of any interest ~ she insisted I tell her a stock to buy & I laughed & told her that her brother RJ was the guy ! 😆 ~ also RJ does warn “Tips are hazardous’ ~ he may recommend something and exit it later & not remember what he conveyed at the IMC event !
I have another reason for liking RJ !
Years ago in a few stock selections it has been a Peter Lynch playout scenario between RJ & me.Read Peter Lynch’s ‘One Up on Wall Street’ & you’ll get the point better…Lynch had picked up a stock for a few dollars and thereafter Merill Lynch came in at @ US $ 15 & consequently heavy buying took it past US $ 40
Will give you one instance….At the turn of the Century in July 2001 I had picked up Matrix Labs at Rs 25 (Fv Rs 10 at the time) ,now delisted as sold of to Mylan Labs.Later RJ came in and picked up a Million Shares at Rs 200 levels (8 lakhs for himself & 2 lakhs for wife Rekha).Heavy Buying followed on non linear company profits and the share price zoomed 12000%,a 120 bagger in five years, with the Price touching Rs 312 in May 2006 after a Split Rs 10 to Rs 2 & Bonus 1:1 in July 2005
Another Instance was VIP which I had an interest in as Blowplast was to merge into it .RJ came in later and VIP zoomed.A fairly recent one was Firstsource Solutions which I entered in 2012 @ Rs 9.RJ came in ,in early double digits in July 2013 and it zoomed ~ Incidentally Dilip Piramal of VIP was chairing the IMC Meet yesterday (right of RJ when viewing pic)
However,before you think of following RJ blindly remember his Aptech & Edelweiss(blogged on this in June 2014) are yet going nowhere for years despite big noise & A2Z Engineering has been a wealth destroyer from Rs 400 (IPO Pricing in December 2010,though RJ’s invested since 2006 & his holding cost is just above par of Rs 10….have blogged in 2010 on this ) to Rs 26 now
Moreover I get an acute sense that strengthens with time that many relatively(this millennium) new kids on the block,& their breed is growing exponentially, having learnt their ropes with World Majors in the field of Investment Banking before breaking out on their own or in groups ,have been galloping ahead in Indian Equities having found the Scale Money Mantra & Nirvana route through sourcing Investment funds from Overseas with a mandate for Indian Equities and routing them through FPI vehicles into Private Equity(IPO exit route) or directly into listed scrips and building(manipulating?) on one multibagger after another and sidelining RJ & diluting the focus on him thereby increasingly making him irreverential & irrelevant in the scheme of things….of course RJ continues to invest & build on his personal wealth on scale while these new aggressive & risk taking juggernauts get incentivised on scale for market returns
Thanks RJ till the next interaction… perhaps in 2025 ! 🙂 …when Sensex is 65000 even at a conservative 10% CAGR in the 10 years from current range of 25000 to 26000 !