Source: Sucheta Dalal
The lunches at Bombay House for Tata Directors during JRD Tata’s time were legendary….and this anecdote adds to the legend
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Category: Anecdotes
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How Rakesh Jhunjhunwala got started
My father was also interested in stocks. When I was a young child, he and his friends would drink in the evening and discuss about the stock market. I would listen to them and one day I asked him why do these prices fluctuate.
He told me to check if there is a news item on Gwalior Rayon in the newspaper, and if there was Gwalior Rayon’s price would fluctuate the next day.
I found it very interesting and I got fascinated by stocks, I self-taught myself. My father told me to do whatever I wanted in life but at least get professionally qualified.
I was always a reasonably good student so I took up chartered accountancy. In January 1985, I completed my CA. I told my father I wanted to go to the stock market. My father reacted by telling me not to ask him or any of his friends for money. He, however, told me that I could live in the house in Mumbai and that if I did not do well in the market I could always earn my livelihood as chartered accountant. This sense of security really drove me in life.
Between 1986 and 1989 I must have earned Rs 20-25 lakhs. After 1986, the market went into a big depression for two three years but I put that money in Tata Power and the Tata Power stocks became about 1100-1200.
Now I was worth Rs 50-55 lakhs.
Sesa Goa had a big fall because there was a depression in the iron ore industry and then prices for the next year had been considerably raised about 20-25%. The stock was available abysmally cheap around Rs. 25-26. There was a projection of a very good growth in profitability in the next year but nobody seemed to believe it.
When I saw the facts, I wanted to invest but I did not have capital.
I bought 4 lakh shares of Sesa Goa in forward trading, worth Rs 1 crore. I sold about 2-2.5 lakh shares at Rs 60-65 and another 1 lakh at Rs 150-175. The prices then went up to Rs 2200 and I sold some shares. I did some other trading too. I had net worth of about Rs 2 – 2.5 crore.
-said Rakesh Jhunjhunwala
Incumbent RBI governor Raghuram Rajan, who was then an officer on special duty in the RBI, recounted that among all the ideas in 2013 was also an “idiotic one”.
This was to entice dollar inflows into India, by offering subsidized protection against rupee depreciation. This would provide comfort to foreign investors.
The forward cover (or full insurance cost) on the rupee-dollar was about 7% per annum, of which the RBI could cover 3.5%. Assuming an inflow of $10 billion, over a three-year period, this could easily cost the RBI and the exchequer between Rs.10,000 crore and Rs.20,000 crore.
Seemed like a crazy and expensive idea.
But slowly it gained traction, since if the rupee didn’t stabilize, the nation would lose much more by way of a higher import bill. For instance, a Rs.4 fall on an import bill of $400 billion leads to an extra outgo of Rs.1.6 trillion.
So, reluctantly, Rajan signed on to the crazy idea. And lo and behold, this turned out to be the prize-winning trick. The nation received more than $30 billion. Not only did the rupee stabilize and strengthen, but three years later, the RBI ended up making a profit on its forward deals. It had shored up adequate reserves in forward purchases to provide for the repayment that will be due next month. So, an idiotic idea worked because it was an intelligent gamble, which paid off.
It was Subbarao’s magnanimity to let Rajan make the announcement of this dollar scheme in 2013. And Rajan, who got much credit for saving the rupee, was humble and gracious to admit that he initially thought the idea was idiotic. The noble actions don’t just speak about the personalities, but are also the hallmark of the institution and its maturity, which at 81, is older than the republic!
-By Ajit Ranade
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Book Review: Bhujia Barons
“Half the population of Bikaner seems to be involved in making bhujia and the other half in eating it”
I was reminded of this old joke when I picked up the book “Bhujia Barons-The untold story of how Haldiram built a 5,000 Crore Empire”
The book traces the story of Haldiram and his three generations as they built an empire based on bhujia across 4 cities-Bikaner,Kolkata,Nagpur and Delhi.
The author has a tendency towards hagiography which makes the book a tedious read.She is also not able to fully explain why Haldirams was so successful despite the intense competition.
There’s one anecdote in the book which I found interesting:
Prabhu Agarwal,the owner of Haldirams Kolkata, pays a gangster 2.5 Lakh Rupees to murder a tea vendor who is obstructing his real estate plans.The conspiracy is exposed and the police comes to arrest him.
Prabhu as per usual asked the policeman “Aapka bhav kitna hai?” and the policeman told him that if Prabhu gave him 20 Lakhs,there won’t be any case against him.
Prabhu was incensed and allegedly retorted, “I keep IPS officers in my pocket for 1000 Rs.”
In order to punish him for his arrogance,the policeman said, “I’ll get you tangled in such a case that you will never be able to get out it for any amount of bail”
Raamdeo Agrawal’s bet on Hero MotoCorp (then Hero Honda) is market legend. In 1995, he invested around Rs 10 lakh in the shares of the two-wheeler manufacturer at Rs 30 apiece, and held on to them for the next 20 years, till the share price rose to Rs 2,600 apiece. When he sold out in 2015, his holding in Hero MotoCorp was earning him Rs 3-4 crore annually in dividend income alone. What makes this all the more noteworthy is that the rise was peppered with many dull periods.
Between March 2000 and March 2003, for instance, the stock did not budge from around Rs 225 levels. It was the dotcom boom era and non-IT stocks were undervalued. Agrawal stayed invested because of his faith in the Munjals, the promoters of Hero MotoCorp.
Again, in March 2011, many investors saw little value in the Hero stock after it parted ways with Honda Motor Company, ending a 20-year joint venture with the Japanese company. Agrawal was the contrarian. He knew Hero MotoCorp would lose its market share a tad, but he was sure the company would remain the leader in the two-wheeler segment. His confidence was validated: Between 2011 and 2015, the stock moved up by 13 percent annually. Though he has sold Hero MotoCorp from his personal portfolio, it is still a part of Motilal Oswal’s PMS schemes.-from Forbes