Investor, Trader, Philanthropist & a Flamboyant All-in-One Man - Rakesh Jhunjhunwala

Investor, Trader, Philanthropist & a Flamboyant All-in-One Man - Rakesh Jhunjhunwala

That’s right, India’s most successful equity investor, our very own Warren Buffet - Rakesh Jhunjhunwala, who made a whopping $1.93 Billion starting from a meager $100 is apt for these diverse and contradicting adjectives. But why? People often ask him, which company will be the next Titan or CRISIL, and as he always does, he responds to such questions with raillery. With an uncommon intelligence and a thing for horses, we bring you an interesting session between the man himself and Outlook Business, which took place at the last year’s Association of Investment Bankers of India’s summit. Have a look and enjoy the excerpt:

What is the question that you are asked most frequently?
People often ask me, “So, which company will be the next Titan or CRISIL?” I tell them that I’m still looking for such a company. Back when I invested in these stocks, I had never imagined that my investments in both these companies would generate a 100% return.

We have heard that horses are an area of interest for you. Is that true?
Yes, my father was very fond of racing. As a child, I would go to the Mahalaxmi Race Course at least four days a week. It is the most wonderful place… it is very exciting. I do gamble but just not on the race course.

Are there any similarities between the highs that you experience in the market and the excitement you feel at the race course?
I am not enough of an expert on horses to have a dogmatic opinion about horse racing. But I think in the stock market, the key to my success is dogmatism coupled with an attitude to learn.

What thoughts run through your mind when you look at the trading screen?
The problem is that my mind works all the time and I end up multi-tasking a lot. I might be corresponding over the phone and emailing someone at the same time that I am looking at the screen. But once I am in front of the screen, I know exactly which stock’s price is on which part of the screen. We trade with prices. Remember, prices convey a whole lot.

What advice would you give to non-professional investors?
There are two to three reasons why one should invest in the markets. The one advice I offer to young couples is that they must invest all their savings in a house. After a house, devote 80% of your savings to the market. Here’s why: India is in a growth phase - the index has gone up from 100 to 28,000 over the past 30 years. I don’t see why this situation will not repeat itself over the next decade. This being a stock market, valuations have to grow. If India grows, earnings have to grow. India saves over $650 Billion a year. In four to five years, this figure will go up to a trillion dollars. Even if 10% of that money flows into the equity markets, that adds up to about a $100 Billion. Why will this money not come to the equity markets? In 1991, 18% of savings flowed into equities and by 2007, this figure stood at 13%. So, there is going to be an upsurge in earnings and money flowing into the market.

If India achieves GDP growth of 12-14%, corporate profit growth will be 18-20%. At some stage, valuations will expand. Which other nation can provide this kind of growth? The most important question is if debt can give me a return of 7% post-tax or if equity can give me a return of 18% post-tax, which other asset class can give me that kind of return? Guys like me are 101% invested in equity. It’s not as if I have not contemplated investing some part of my assets in a non-equity class. In fact, I’d like to share an anecdote about this. My mother is not concerned about money at all. One day, she pointed out that I put my money only in paper and never buy property. So, I bought a flat in Malabar Hill in 2004 by selling Rs. 27 Crores worth of CRISIL shares. That flat was sold for Rs. 48 Crores three days ago. Had I not sold those CRISIL shares back then, they would have been worth Rs. 700 Crores plus a Rs. 50 Crores dividend.

Is there a right time to enter and exit a market?
It is very difficult to predict the right time. If you invest at all stages and under all circumstances with confidence, then you will be a fine investor. The most important thing is having the right attitude. I find that in India most people think that the stock market is a race course. People hope to double their money without realizing that they could lose it too.

The two most infamous adjectives in the English language are valuable, when referring to a stock, and beautiful, when referring to a girl - they are both so relative and personal. So, when to buy and when to exit depends a lot upon the circumstances. I will sell a stock when it is highly leveraged and if I want to reduce my leverage or if I have a better opportunity or if I see a permanent impairment of value. Titan’s share price was Rs. 30 in October 2001. In 2006, the price was Rs. 61 and later shot up to Rs. 600. I felt that there was no permanent impairment of value. Theoretically, when the P/E ratio is at its highest and earnings have peaked, that is the time to sell. When and what to buy cannot be answered without a real-life example.

Can you talk a little more about attitude?
I have a practical approach to life. I follow the spirit of the law. I don’t want to be involved with the government in order to make money. I don’t want to do anything in life that needs me to go to the Sachivalaya or South Block or to a government office. The one time I went to the Sachivalaya was when I was setting up an orphanage and wanted to extend the FSI of the building from one to two.

Second, if money comes, that is fine. Either my money will halve or double. Maybe I will buy a corporate jet. There is nothing I really want to spend on. What I have on me everyday is a Rs. 800 shirt, a Titan watch, glasses, Metro shoes and a VIP suitcase. So, I don’t have many expenses. The only thing I spend on is horses. The maintenance cost of my horses is more than my household expenditure.

What are the pitfalls of success?
I have learnt an important lesson in life - success produces its own problems. People will always be envious and talk about you behind your back. Earlier, this would make me angry but now I accept it as a part of life. When I was young, my father was in the income tax department. We always had very rich friends, so there were a lot of things that we couldn’t afford but my friends could. I would go to college by bus but return in a friend’s car. My father taught me an important lesson - he always said, “Rakesh, always aspire but never envy.”

That being said, I have not faced anything much except for some harassment from the press. Between 2003 and 2005, it was assumed that because I had made money, I was a thief. I have not made money in the market by being a thief. My friends warned me that if I attended public events, the authorities would trap me. I always tell the people who threaten me that I am not scared of their threats but am concerned about my deeds. Don’t forget that India is a democracy. The other pitfall is that you can’t go to a bar with a girlfriend because everybody recognizes you.

You advised young couples to buy a house first. But, at least in Mumbai, how will they manage to save so much money?
Nothing in life is easy. Today, I have got wealth and success and you might think it is easy for me to buy a house. Back then, I didn’t have an office, only a bag. In 1985, I was a Marwari chartered accountant entering the stock market. To achieve anything in life you have to fight for it and you have to believe in it. You need a little bit of luck and conviction. Saying that I don’t have the money to buy a flat won’t help.

My wife comes from a rich family. She had a car from the time she was 18 and an air-conditioner since she was born. After our marriage in 1987, we travelled by bus and I bought an air-conditioner only the next year. So, you have to adjust to the circumstances and not pity yourself. I don’t think salaries are on the lower side in India today for most middle-class families. I run a BPO where a 21-year-old starts with a monthly salary of Rs. 15,000 and, if he’s good, can touch Rs. 45,000-50,000 by the time he is 25. At 25, I was earning Rs. 60 as a chartered accountant.

What is the next thing you aspire to possess?
The first thing I pray to God for is to get away with certain habits and to remain healthy. As for material things, I want a lovely plot to build a house and a private jet. On July 5, 2020, I will turn 60. I want to convince my wife to donate Rs. 5,000 Crores of our personal wealth in 2020 and again in 2025 and in 2030. I contribute 20-25% of my wealth to charity even today but I have bigger aspirations in this field. I am confident that my wealth will go up, though not as much as I want. I am going to eat the same food, smoke the same cigarettes, drink the same whiskey and drive the same car nonetheless. If I do very well, then I may have a 16-seater corporate jet and if I don’t do as well, then I may buy an 8-seater. That is the only difference.

You have dabbled in cinema as well. How did that happen?
I love making movies - I find cinema very interesting. People tell me that I make movies so that I can meet the actresses but that is not true. I do not mix business with pleasure. I have produced Sridevi-starrer English Vinglish in 2012 and Shamitabh featuring Amitabh Bachchan and Dhanush in 2015. Both the movies have made money. I am going to partner with a huge star and we plan to make TV serials and six to seven films together. This sector is profitable and we are making money. Of course, I am not afraid of making mistakes because I don’t invest more than 2-3% of my wealth at a time. None of my investments have cost me more than 2 million-3 million. The two investments where I misjudged the quality and character of the entrepreneur were A2Z Maintenance and Engineering Services and Bilcare. I had blind faith in both the companies but I have learned from my mistakes. And, as I always say, the best is yet to come.

What would be your criteria while hiring an investment banker?
One of my partners happens to be an investment banker. We are disinvesting partly in an Ahmedabad-based company. He does everything and helps me find companies where I can find the right valuation. I prefer honest bankers. My merchant banker told me the A2Z issue would never be subscribed and I said that was impossible. The IPO was priced at Rs. 400 (Issue Price/Equity Share) and there was a shortfall... I put in an additional Rs. 70 Crores. Later, I sold all the shares at Rs. 10-11 a piece.

How do you balance your investments with trading?
I had no money when I started. Trading started for me as a compulsion; I have invested only what I want in it. I love trading more than investing because in the latter you put both your capital and your brain at stake. In the former, you only put your brain at stake. I invest all my stocks in my wife’s and my own name. I have a partnership firm called Rare Enterprises, whose only work is trading. I think this year we will pay about Rs. 150 Crores in taxes.

There is nothing wrong with trading - it is all about momentum and leverage. You have to trade with an attitude, you have to be humble. Trading is like a T20 match, you give and take quickly. Investing is like a test match. You have to compartmentalize your investments. I never trade my investments. If Titan is at Rs. 350 and I sell 50 Lakh shares, I know that the price will go down to Rs. 300. So, I only trade liquid scrips. You should have a girlfriend and a wife and keep them both happy. Then you will know how to do both trading and investing.

What are the attributes that are very important for an investor?
You have to be dogmatic. Between 2006 and 2008, the market doubled and Lupin’s share price was at Rs. 600. Over the next six years, the share price jumped to Rs. 7500. I was the second-largest investor and my conviction paid off. I have purchased 20 Million shares of Rallis India, which means I own 10% of the company. In this whole rally, the stock has not gone up. I am holding on to it because I believe in it. I review each of my investments and if the original thought process based on which I bought the share makes sense, then I hold on to it. If you think you are always right and the market is wrong, you will not learn anything. Only humility and a desire to learn will ensure progress.

If not an investor, what would you have been?
Well, I always wanted to be a journalist. If you are a good journalist, you can bring about profound change. I even contemplated becoming a counselor. But at the age of 16, I decided that my future lies in the stock market. My parents agreed and my father advised me to do a chartered accountancy course or else nobody would marry me or give me a job. Today, I don’t manage anybody’s money and am not answerable to anybody. I have only one client and that is my wife.

If the government invites you to join it in an advisory capacity, what role do you see for yourself?
Disinvestment is an area where I think I can contribute. The Indian government’s disinvestment is done in a haphazard manner - they don’t know how to choose companies to sell. China raised $15 Billion-20 Billion in 2003-2004 via disinvestment. Why should we not sell 25% of our good undertakings and raise $25 Billion-30 Billion? I think the worst corporate governance employed by an organization in the country is that by the government. I am a shareholder of HPCL. What right do they have to give my wealth for their subsidy? You can’t use these PSUs to achieve social objectives. It may restrict the number of scrips that I can trade or invest in but I think I can help with planned disinvestment.

(This article was published in the Outlook Business Magazine on April 3rd, 2015)

24 comments: Investor, Trader, Philanthropist & a Flamboyant All-in-One Man - Rakesh Jhunjhunwala

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  • ahmad        
    RAKESHBHARATHRAM.B
    aug 29,2018 at 11:29 - Reply

    Sri. Rakeshji, Great and interesting to read about your success. You are my inspirations. I do invest in stocks with small amount. Please advice youngster like me and also guide us. Thanks and regards RAKESH BHARATH RAM

  • ahmad        
    Jashwant Singh
    feb 13,2017 at 08:57 - Reply

    I want to invest 30k in stock please suggest me the best penny stock

    • ahmad        
      Team StockAxis
      feb 14,2017 at 12:26

      Hello Mr. Singh,

      We highly advise you against investing in penny stocks unless and until you feel and know that there is a turnaround possible. Instead, invest in quality companies poised for growth.

      Our advisor will get in touch with you shortly for the same.

      Happy Investing!

  • ahmad        
    Rajesh Shah
    dec 21,2016 at 09:24 - Reply

    Good

  • ahmad        
    MATHA RAJU
    dec 11,2016 at 08:10 - Reply

    Great Rakeshji, it is wonderful to know about your growth in stock market like INDIAS WARREN BUFFET. iT is fantastic to understand about your strong faith on your own trading strategy. I hope I will become an another Rakesh ZunZunwala with in a short span of period.The only thing is that I need your blessings and guidance.

  • ahmad        
    NARESH CHANDRA JOSHI
    dec 10,2016 at 07:22 - Reply

    It is the first time I went through the article snd found it very interesting, informative snd motivating, too. It would certainly help especially to the new entrants wish to join the stockmarket. Look forward to have more inspiring and knowledgeable articles in ensuing weeks. Thanks. joshivandana715@gmail.com

  • ahmad        
    Ashraf
    jul 10,2016 at 06:15 - Reply

    Read this many times Will get something

  • ahmad        
    Vijaya kumara
    jul 08,2016 at 06:23 - Reply

    So impressive interview and worth reading...

  • ahmad        
    skghosh
    may 29,2016 at 05:02 - Reply

    Great, a lot of valuable learning, hats off to RJ

  • ahmad        
    arun kumar jain
    may 22,2016 at 11:23 - Reply

    excellent, when you are a successful personality then people can listen you;and if your period of fall comes no body , stands with you ;so.....this is nature's rule....nothing new but if you inspired from these facts that means you may know the reality in depth.

  • ahmad        
    Bijay kumar
    may 21,2016 at 01:10 - Reply

    thank you for forward this interview.Rakesh jhunjunwala always big investr of our country .I learn lot from this interview .Superb Interview

  • ahmad        
    Madhur
    may 20,2016 at 10:25 - Reply

    I have interest investing in stock market but how select stocks in market to get returns plzz give me reply me sirt??

  • ahmad        
    Nilesh Tayal
    may 19,2016 at 11:22 - Reply

    In 2020.rakeshji will hav either 16 seater or 6 seater jet.this line can give more and more confidence to every investers.. thanks rakeshji .we proud of u.hatts off u.....

  • ahmad        
    syed shahid husain
    may 18,2016 at 10:16 - Reply

    I am doing F&O but i loose lot of money since 2009, I want to earn lot of money, but for trading I have not sufficient money to trade in equities also. shall I take bank loan for trading? Please reply.

    • ahmad        
      Team StockAxis
      may 18,2016 at 10:21

      Hello Mr. Syed,

      Trading, specially Intraday or F&O is the worst thing to do in the stock market. Like you yourself said, you have been losing money since 2009, that should be proof enough for you to stop this practice.

      We strongly suggest you to read the article:

      Why Trade Intraday? Go To Las Vegas Instead!!!

      We hope that it will prove to be an eye opener to you.

      We'll get in touch shortly. Our advisor will contact you and guide you through your queries.

      Happy Investing!

  • ahmad        
    KBSMani
    may 18,2016 at 09:45 - Reply

    Yes. I'm Learning. Thanks Rakesh (Young) brother.

  • ahmad        
    inderjit singh arora
    may 17,2016 at 03:08 - Reply

    I wish i could ever meet Mr. Jhunjhunwala in person and get his blessing. He is like a 'PARAS'.( Alchemist) Regards Arora

  • ahmad        
    R S Katiyar
    may 17,2016 at 11:07 - Reply

    Good & daring ideas to learn & how to be honest in business that pays in ones life

  • ahmad        
    shanti sarup sharma
    may 16,2016 at 11:01 - Reply

    I also want to be rich pl.guide how I should trade.

  • ahmad        
    Dinshaw N Chenoy
    may 16,2016 at 10:56 - Reply

    Dear Sir, After reading the above account I pray please do not accept any position offered in Government.

  • ahmad        
    Srinivas Thatepally
    may 16,2016 at 09:04 - Reply

    Iam interested in invest stock market what is the basic precautions to select equity

  • ahmad        
    Ram Prakash Suri
    may 16,2016 at 07:30 - Reply

    Superb interview.It must be read by each individual who has interest in share market.

  • ahmad        
    M J Dave
    may 16,2016 at 06:31 - Reply

    Good investment idea

  • ahmad        
    mahesh kakkar
    may 16,2016 at 04:24 - Reply

    its great interview with Mr.r.jhunjunwala

  • ahmad        
    Kumar
    may 16,2016 at 03:59 - Reply

    Stock

  • ahmad        
    rajesh kumar
    may 16,2016 at 03:43 - Reply

    Achi hai