One thing that strikes about Rakesh Jhunjhunwala’s office in south Mumbai is the number of books it holds; on tables, in shelves, on lofts. They seem misplaced.
For a man who epitomises capitalism and the principle of making money, the last image people would have is of him poring over books. But Rakesh Jhunjhunwala revels in surprising. Like his strong views against investment in e-commerce at the current valuations.
In an exclusive interview to Arnab Mitra and Ramsurya Mamidenna in his office, Jhunjhunwala opens up about his reading habits, on how India’s growth could touch double digits and why people should be confident about investing and not afraid to make mistakes.
A section of Indian industry is getting impatient with the pace of economic decision making by the Narendra Modi government. What do you think?
The government is doing a fine job. You can’t be impatient. He (Modi) has brought about a qualitative change in the bureaucracy. The way he has communicated his intentions is excellent. Things progress at their pace. Even when he was the CM of Gujarat, all his initiatives started showing results after 2 years. So, we have to be patient and allow the government's initiatives time to play out.
When do you see growth picking up?
India will achieve double digit growth in 3-4 years. We are capable of that and have all the things needed for such a growth.
What steps are needed for doing the right things?
We are taking the right steps. But I think we should have a long-term approach to disinvestment, not an ad hoc approach that all governments have followed.
Why is growth sputtering?
I don’t understand this. Why are we all negative? We look for things that are not working properly and miss those that are doing fine. Measures are being taken in the right pace. All these things take time.
What are your views on e-commerce?
I am very bullish about e-commerce but at current valuations, most (Indian) companies are over-priced. I am not convinced about all these billion dollar valuations. What is their business model? How will they make money? They are taking somebody else’s products and selling them cheaper to attract customers. And they are doing this by spending investors’ money. How long can that last?
But how come large investors are investing in e-commerce?
As I said, I may be wrong. Probably they see something that I don’t. I don’t think Indian e-commerce companies have an evolved business model. The downside risks are more than the potential gains. But if others feel differently, best of luck to them.
You are known as the man with the Midas touch. Lots of people follow your investments. What do you have to say to them?
That’s an illusion. You can’t make money on borrowed knowledge. If following Rakesh Jhunjhunwala was all it took to make money, a lot more people would be rich. It requires patience and you learn from mistakes. I made many mistakes but my triumphs have received far greater publicity than my failures.
I am not afraid of making mistakes. But my mistakes were those that I could afford. That's very important: mistakes will happen but you must ensure that you keep them within limits you can afford.
How did you start?
I always had the ambition to enter the stock markets. My father was a regular middle class man. He told me I could continue to live in his house and pursue my ambition. I was a CA already and knew that if I didn’t make it, I could go and find a job somewhere. My brother was a practicing CA. He introduced me to some clients. I borrowed money from them and started. My goal was to earn Rs 20,000 a month. In 1986, I did my first big transaction: I bought Tata Tea shares for Rs 2 lakh and in three to four months sold them for Rs 7 lakh. I made Rs 5 lakh.
You are known as the Warren Buffet of India…
I don’t want to be a Warren Buffet. I am happy being Rakesh Jhunjhunwala. I have great respect for Mr Buffet and had the honour of once having lunch with him. I learnt a lot from that meeting.
I don’t do something with the intention to make money. I do what I like. I have a small team that collects data (on companies, sectors and the economy) but I do the analysis myself.
Is the market currently fairly valued?
I think there is still scope for growth but there could be a correction anytime.
Why do you think the markets are volatile?
I don’t think the markets are volatile. They reflect the current state of the economy.
When is the next breakout?
I don’t know when there would be the next breakout or when there would be a correction. It is very difficult to predict the way the market would move. I sit at my desk and look at the screens all day trying to figure out which way the market would move.
What sectors are you interested in?
If you are asking me which sectors or companies I'll invest in... I won't tell you. I'm bullish on all sectors. But I think most sectors will do well.
Do you think consumer spending will prevail with inflation coming down?
I think inflation will average 4% over the next year. Oil prices are down (to about $60 per barrel). I think it will fall further. The benefit will percolate slowly to the entire economy.
Price of food has been low compared to last year. I think the focus on kharif crop is wrong. Kharif has come and gone. How will it impact food prices? I think India is full of doubting Thomases.
The international markets are unstable. Japan is in trouble. What does that mean for India?
If Japan is in trouble, all the more reason for them to come to India, where there is growth. Money will come to India. But we have to create the right conditions to facilitate investment to come to India.
Do you think that the right signals are being sent as far as insurance is concerned?
They are going to do it (pass the insurance Bill). They can do a joint session and get it passed. The current government is moving fast. Foreign investors are smart enough to know that Modi means business.
What is your opinion about the RBI cutting rates?
I think the rate cut will happen before the Budget.
You have made a couple of contrarian investment calls recently. You put money in Spice Jet and MCX. What did you see that others didn't?
My investment in Spice Jet was very small. I sold that long before. What’s wrong with investing in MCX? Why should it be contrarian? I had invested after FT (the parent company) was separated from MCX. MCX is a great business with very big entry barrier.
What do you look for in a company when you make an investment?
I look for opportunity, scalability, governance and after everything else, the valuation. Let me tell you, I am not afraid of making mistakes.
Can you name some companies where your investments have been good?
In Praj Industries, I have done very well. Some of the other companies include Tata Tea, Tata Power, ACC, Tata Motors, Sesa Goa. We can't predict what is going to happen or how the markets will behave. But there has to be what I call reasoned decision. I also call my approach informed ignorance.
How do you relax? How do you keep the stress under control?
I have no stress. If I lose money -- even if my wealth halves -- what difference will it make? Will it take away my house my car, or will my children stop going to school? I relax by reading, watching English and Hindi movies. I also enjoy playing with my kids.
There are political movements that are impacting the economic environment. The Opposition has been raising the conversion issue to stop Parliament from conducting its business.
The PM is not supporting conversions. Has he said that anywhere? Modi is in control. About 80% of the control is with him. There is a lot of social divide in UP and Jharkhand. But this is nothing new. There is social divide even in the US. The shooting down of two police officers in the US…isn’t that social divide? Such things will not impact investments.
I agree we should abolish Article 370. I am all for a Uniform Civil Code. I am not afraid of saying these things. I told a TV channel sometime back that I would commit suicide if Rahul Gandhi came to power.
I think we are on the right track. I will give you an example. We had the telecom revolution which changed things dramatically. I for one would get uneasy if I don’t talk to my kids for 48 hours. I have a house help, Ramu, who also has two kids back in his village.
Earlier he could not speak to his family. Now he can speak to his mother, wife and kids also. The marginal utility of benefits for lower segment of society will be extremely high.
What are your views about aviation as a sector?
If oil prices remain the way they are, the negative views about this sector will change.
Any new sectors that you can talk about?
Most sectors will create wealth. I think pharma is one area that is evolving.
What about defence?
Defence is a very important area. We are capable of mastering this field. If we can develop an aircraft, why can’t we export these aircraft? We are launching satellites for others. We are good in manufacturing. We will do well in skilled manufacturing.
Let’s not look at the past. We are evolving. It will take time. What people are forgetting is that US and Europe took 300 years to reach this stage. We started in 1947, it’s been only 60 years. We will evolve. Even Sony started by assembling transistors. People are underestimating the consequences. We are evolving as a society also. People ensured that those who were involved in scams, lost in the elections.
What is your advice to small investors who typically come in when the market has run its course, and lose?
I would say invest in SIPs. Don’t time the market. Have confidence and have faith in your ability to make money.
There are a lot of books in your office. Do you get the time to read?
All the books have been gifted to me. I haven’t bought a single book. I like reading but don’t get much time. I get about 30 mins in the morning and at the end of the day. I read on a variety of subjects… psychology, markets, commodities. I like reading magazines like the Economist and India Today.