Rakesh Jhunjhunwala on his Investment Mantra

The Big Bull of the Indian markets, Rakesh Jhunjhunwala, has had a mixed year. Even as the billionaire investor battled significant health issues including a debilitating bout of Covid-19, the performance of his stock portfolio has been nothing short of stellar. And while he scoffs at new-age trading favourites such as Bitcoin and Zomato, it hasn’t stopped him from a daring foray into the skies with his upcoming budget airline, Akasa Air. In a freewheeling chat with BT’s Global Business Editor Udayan Mukherjee, Jhunjhunwala explains why he remains the staunchest bull on Dalal Street. Edited excerpts:

UM: With 60,000 done and dusted on the Sensex, do you think there are even greater summits ahead for us in the months to come before this bull market tires out?

RJ: Well, my personal opinion is that 60,000 is just a figure. ‘Dil hai ki manta nahi, bazaar hai ki rukta nahi [The heart never agrees and the market never stops]’. We are seeing the largest ever bull run in India. India is changing and very few people are recognising this change. I believe the market is reading the future better than we are. Despite all the scepticism, the Nifty has moved from 7,500 to nearly 18,000, so corrections will come and go. It’s all part of the journey. The day I came to the market, the Sensex was 159.99, today it is 60,000.

So, I think tens of thousands will be added, many zeros will be added—but it is going to take time.

UM: You have seen so many bull runs in the past and the biggest one that I remember is 2003-08—the one that just kept on going and the index multiplied several times. Could we be in for that kind of a run or do you see this one being somewhat different?

RJ: I feel we will see that kind of a bull run but it is going to take more time. It may not happen in the same time period, it may take five or even 10 years. We also had this kind of a bull run in 1989, when the Sensex went from 400 to 4,000. Of course, the last 1,000 points was Mr [Harshad] Mehta’s contribution and it didn’t last.

I believe India is progressively changing and the change gets more accentuated with time. Also, remember that in the last 10 years, we have really not gone anywhere. The Nifty did 12,000 in between 2012 and 2020, but always fell back and there was no breadth that time. Now we are seeing tremendous breadth in the market.

India has changed—in terms of the corporate sector, GST and farm laws. For me, the farm law means that potatoes that are not saleable in West Bengal at Rs 3 per kg, are available in Mumbai at Rs 40 a kg! I guess nobody has read the Electricity Bill [Electricity Amendment Bill 2021 to delicense power distribution] and when that law passes, it is going to be bigger than even the 1991 reforms. Prime Minister [Narendra] Modi is pushing these economic reforms through because he knows if India does not change, his legacy cannot be changed.

What I find most appealing in India is that this change is coming with social needs being fulfilled. People do not appreciate what ‘Nal Se Jal’ means. Every household in India will have clean water. People walk six kilometres to get a bucket of water. The aim is that every Indian should get water in their house.

My domestic help is able to get a passport because of Jan Dhan. People can now send money to their hometown and do video calls with their children. I think we must be the most digitised society in the world.

With the help of Aadhaar, my help was able to get a passport.

Rajiv Gandhi [former Prime Minister] said only 15 paisa (out of a rupee) of social welfare funds actually reaches the poor, but now it is closer to 85 paisa.

People are not recognising the change that is underway.

We are a country of a trillion dollars of saving. We already have $757 billion. We have created the infrastructure to channelise a major part of savings into financial assets. We have channelised savings into the stock market. I think we are having Corporate Governance by the Razor of the Sword.

The change that is taking place in India is unrecognised and the government is hell-bent on doing this.

Corporate profits are at their lowest level in India as a percentage of GDP in the whole world. We were at 8 per cent in 2008, and it fell to 3 per cent. In America, corporate profits are 10 per cent of GDP. In India it is 4 per cent. The profit to GDP ratio has to grow.

UM: So, do you sense that the public is beginning to recognise these facts and will inevitably enter the market?

RJ: Absolutely. People say nearly 4 crore [40 million] demat accounts have been opened. But there are 90 crore [900 million] adult Indians! Look at the balance 85 crore [850 million] I say—when are they coming to the bourses? They are going to come a little late.

I have been bullish on the markets since the May of 2020. I feel like writing an article ‘Believe in India, fellow Indians’.

I don’t know why Indians are so pessimistic. I think India has changed slowly because of its democracy, but the change will surely come. Once change comes, it is forever.

I am very, very optimistic and bullish. But please don’t think my patriotism is getting confused with economic values. Economically, India is on the verge of major changes.

In 13-15 months, we are going to have a trillion dollars of funds coming in. Nobody can then attack the rupee.

Software exports are to going to grow at 15 per cent.

I think the value added of software exports is greater than the value added of all merchandise exports come together.

So, I don’t understand why people are not recognising this. As much as 45 per cent of all medicines used in America are made in India.

This kind of growth will continue for decades. We have the greatest talent in the world and we have the home market. We never stole the technology of nuclear weapons. We have sent a vehicle to Mars. I am very optimistic on the India story. I believe the markets have just passed the pessimism phase.

UM: How are you positioning yourself in this bull run? You seem to be doing it differently this time, investing in businesses of your own, like your mentor Radhakishan Damani… How do you see this phase of your investing career where you are almost like an entrepreneur or a promoter?

RJ: Well, I am doing this from 2007 and have at least 15 unlisted investments out of which of five are gorillas!

UM: Tell me little bit of your airline Akasa. When is it coming up? The aviation market may be a bit different with Air India sold to a private player, Jet Airways getting revived. How do you plan to position your airline?

RJ: I can say only two things—first, I have an agreement with my co-promoters and I am not allowed to speak publicly about the airline. Second, I am confident that it will do well amidst all the scepticism surrounding aviation as a business. I am prepared to face failure. I am not fearful of making mistakes. I am very confident.

UM: How are you reading the ongoing disruption in the automobiles space—how do you see electric vehicles changing the landscape for auto companies? You have shareholdings in large auto stocks like Tata Motors. Do you think new disruptors like Ola will succeed or do you see established players capitalising better on this opportunity?

RJ: One of the largest investments of my life is Tata Motors. The company will lead in India and in the developing world—that is my judgement. I don’t have to think beyond that. Tata Motors is already leading the electric vehicles revolution not only in India but in the developing world as well. They will make affordable electric cars. I know they will succeed.

UM: Since we are talking about the bull market, I want to ask you about the leaders of the last bull market, which were financial stocks, an area where people made a lot of money. When I look at your portfolio, you somehow seem to have missed that boat. I see names like Indiabulls Housing, Federal Bank, Edelweiss—these are not typical Rakesh Jhunjhunwala stocks, they have not performed well. Do you think Star Insurance will fill that void in your portfolio?

RJ: I have also made a lot of investments in public sector banks like Canara Bank and others. I am bullish on that space.

UM: The other thing that will characterise this bull market as we go forward is the spate of digital listings which are happening. You have seen Zomato and there many others lined up for the next few months. How are you going to approach this digital space as an investor?

RJ: I have two investments in the digital space. One is in Nazara Technologies. I am a strong believer in cash flows. Nazara Tech, until the public issue, had raised $500 million. So, they were a cash positive company during the time of investment. My other digital investment is in the BPO space, which is a non-listed company and I am a majority owner and promoter in that company.

But I don’t claim to understand the digital space much. Crypto, digital, Zomato, I don’t need to join every party. I believe in cash flows and I feel we have discounted too much of the future. For example, if you take 25 companies in India which have given the most consistent returns in the last 20 years—they are valued today at 30 times cash flow in a bear market and 40 times cash flow in a bull market.

So, for Zomato to justify its valuation and to be compared to those companies, it will have to generate 4,000 per cent of post-tax cash flows, which is Rs 6,000 crore cash for a valuation of Rs 1.25 lakh crore. Its first quarter loss was 53 per cent of incremental turnover. Where is the cash flow?

I say good luck to everyone. But I don’t want to join that party.

UM: Do none of these new digital businesses impress you?

RJ: I don’t examine those companies where I don’t have to invest. But the entrepreneurship, the energy and the dedication that these entrepreneurs bring are unbelievable; my salute to all of them. I have the highest personal respect for them, but that does not mean that I will go [and] invest in their stocks.

UM: What about Bitcoin? Have you been tempted at all to dabble in it?

RJ: No, I don’t waste my time. I don’t even look at it. No sovereign will ever allow the power to issue currency to another entity. And crypto can never become a regular currency of exchange, in my opinion.

UM: I want to end on a slightly personal note. You have recently struggled with major health issues in your personal life, but from a stock market perspective, your fortunes have grown manifold. How would you sum up the last couple of years during this difficult Covid-19 phase?

RJ: The last few years have been great for me mentally and very good financially. I am a fighter. There is a paraplegic girl who has climbed mountains. When I think of her, I know nothing is impossible. I am hopeful that things will change for the better. I have lost 18 kg of weight. I am not a diabetic now. Eighteen weeks of bed rest made my legs really weak, but I figured out the real priorities in my life. I am making many lifestyle changes, have incorporated yoga and limited the consumption of intoxicating vices. I am thinking of retiring from active trading so that I have more time to spend with myself and my children who mean everything to me. I am thinking of visiting places that I am yet to see, learn dancing, swimming, and do things that I enjoy other than the stock market.

UM: I know that you are building this swanky house in South Mumbai, to be ready by the end of the year. The day you move in, if you had the choice of calling three people to your new house for dinner, who would those people be?

RJ: I would invite Winston Churchill, George Soros and Atal Bihari Vajpayee ji. What a dinner it will be!