The Pied Piper of Stock Market: Rakesh Jhunjhunwala

By: Harshita Mehrotra

One thing common between Bollywood and Indian Stock Market is that both have their kings; Bollywood has its King Khan, a.k.a Shahrukh khan, while Dalal street has Rakesh Jhunjhunwala.

Rakesh Jhunjhunwala, also referred to as the "Big bull of Dalal Street", was an Indian billionaire, business magnate, stock trader, and veteran investor. He started his journey in the stock market way back in 1985 when the Bombay Stock Exchange (SENSEX Index) was at a mere 150 points. He started off as a trader by making a quick profit with a borrowed amount of Rs. 5000. However, with time, the duration and size of his bets started increasing along with the value of his portfolio. Many investors entered the market; however, what made him stand out from the crowd was his unorthodox and daring style of picking companies. His most significant long-term investments never included those sectors that were regarded as safety bets like consumer goods, but instead involved:

• A watch and jewellery maker: Titan Company

• A rating agency: CRISIL

• A Pharmaceutical Company: Lupin & Star Health

His 5.10% holding in Titan alone is worth over Rs 11,086.9 Crores, followed by Star Health and Allied Insurance Co Ltd at Rs. 7,017.5 Crores, Metro Brands at Rs. 3,348.8 Crores, and Tata Motors at Rs. 1,731.1 Crores.

All the stocks he invested in had one thing in common: businesses had growth potential. As in the case of Titan, while its time products division was showing degrowth, its jewellery business grew 30% in the year 2002-03 and represented huge growth opportunities since unorganized players mostly occupied the jewellery segment. Along with growth factors, the majority of the multi-baggers in his portfolio were mid-cap and small-cap stocks or stocks trading in financial services sectors, and he believed that the growth of these sectors was directly linked with the growth in the Indian economy.

His net worth grew from roughly $1.3 billion in March 2013 to $5.8 billion in 2022, making him one of India's high net worth stock market investors. This earned him titles like "The Big bull of the Indian Stock market" and "The Warren Buffet of India".

He used to manage his own portfolio through his private equity firm "RARE Enterprises", which invests in companies both in the listed and unlisted space. Coined from the first two letters of his and his wife Rekha's name, this AMC favoured investments in finance, tech, retail, and pharma sectors. Some of the well-known picks by the firm were Syska Led, Singer India, Aptech, Zee Entertainment Enterprises, Nazara Technologies, Metro Brands, Concord Biotech, and IKS Health, out of which Syska LED is still in the unlisted space while others are either listed or in the process of launching IPO.

After capturing companies on land, this bull challenged the saying "Sky is the limit" by introducing Akasa Airline. In 2021 when the entire aviation industry was reeling under significant losses due to the ongoing Covid-19 pandemic, he co-founded Akasa Air, a low-cost airline in India, along with former Jet Airways CEO Vinay Dubey, by investing Rs. 260 Crore for a 40% stake in the airline. What makes it unique from other airlines is that it follows an ultra-low-cost model that cuts back on all expendable costs.

Apart from being an investor, he was also a director of major companies such as Prime Focus Ltd, Geojit BNP Paribas Financial Services, Praj Industries, and Concord Biotech. Adding more feathers to his hat, he made his debut in the Bollywood industry as a film producer and had produced films such as English Vinglish, Shamitabh, Ki and Ka.

After going through his life's achievements, now let's have a look at some of the investment principles he followed which made him an ace investor and enabled him to achieve that level of success:

1. Having a Stock Selection Framework

Before investing in any company, there were three things that he used to look for in a business:

• External Opportunities: Every industry has a growing opportunity, and the one who identifies these opportunities benefits from them. In 2005, when India became part of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, he identified that India had huge potential to be a market for contract manufacturing and research. Since then, we have seen companies like Divi Laboratries, PI Industries, and Laurus Labs emerge as giants.

• Competitive Ability: A business's competitive ability refers to how it can produce or offer its products and services better than its competitors. It allows companies to generate superior margins and generate value for their shareholders. Like in the case of Nazara technologies, the company's competitive advantage comes from its diverse portfolio of gaming, e-learning, and ad-tech assets, which have created an ecosystem across multiple markets that help them scale up through proprietary tech, relationships with ecosystem partners, and in-house content. Hence it is better positioned in the market in comparison to its peers.

• Well-managed business: The performance of a company is a direct function of the competence of its management. Shady management teams can destroy shareholder wealth by engaging in unscrupulous activities. On the other hand, competent management can sail a company through tough times. It can be observed in the case of Titan, whose management was able to sail through the challenge of a decline in revenues from the watches segment and focus more on its Gems and Jewellery segment when it observed demand picking up in that category.

2. Taking as much risk only as you can handle

His investments in publicly traded companies are estimated to be valued at more than Rs. 41,000 Crores, of which he planned to invest Rs. 260 Crores in Akasa. The fresh investment accounted for less than 1% of his total holdings. The amount of his bet showed that he was investing money he could afford to lose and won't be significantly impacted even if the airline didn't succeed. On the other hand, if the business succeeds, he could make a good profit.

3. Investing for the Long term

He was an ardent follower of the saying, "Patience is the key to virtue". Although he used to take both long and short-term bets in the market, what made him stand out from the pack of traders was the size of his bets when his conviction was high and the period for which he used to stay invested.

Apart from all these, his eternal optimism about the growth of the Indian economy and its business is something every investor should follow and keep in mind to generate wealth in the long term. He may have left us, but his indelible legacy will continue to inspire newbie traders and investors alike.