Blogs

Stillness, backing a mission oriented promoter and the rewards of good Karma – Rakesh Jhunjhunwala’s incredible 340x returns in Inventurus

Inventurus Knowledge Solutions, a company promoted by Sachin Gupta and the late Rakesh Jhunjhunwala in 2006, is expected to list in the next 2 weeks.  The grape vine has the IPO valuation of the company pegged at between 20000-25000 Cr. If we take the mid-point of that range, the original investment has compounded ~ 340x for the Jhunjhunwala family in the last 17 years, an IRR of 41%. This adds to the long list of 100 bagger returns generated by him. 

Why can’t more of us be like him? Other than the ability to see the future with more clarity, what attitude is needed to earn such returns?

What I learned from Rakesh Jhunjhunwala

Rakesh Jhunjhunwala, India’s favourite investor, passed away yesterday at the young age of 62.  The world knows him for his wealth, his passion for investing and for his wit. I am privileged to share a side of him not many knew by virtue of my association at his family office “RARE” between 2006 to 2014 and the mentoring I benefited from till his last days.

Rakesh “Bhaiya,” as he was affectionately referred to, was perhaps the strongest believer in the India growth story that I have known.  His reasoning was India’s democratic roots and consensus-based approach meant growth would be more long lasting and gain momentum with reforms.

Investing during a crisis

It is now clear that a macro risk (Russia/Ukraine) has become a known event.  Not surprisingly the markets are selling off as new information is factored into prices. 

No one knows how this will end or its short term implications.  If anyone tells you they do, it tells you more about them than their forecasting abilities.

Signal vs noise – what game are we playing?

“In life, the challenge is not so much to figure out how best to play the game; the challenge is to figure out what game you’re playing.” (Kwame Anthony Appiah http://appiah.net/)

CLSA is a reputed broking house.  It published a report 2 days ago recommending investors book profit in India.

We agree with CLSAs that valuations in India, on aggregate, are stretched.  In our last letter we mentioned, we were “cautious, but not bearish” and that because we have borrowed returns from the future, we could be in for a period of muted returns.

Playing the game vs being clear on what game you are playing

In trying to optimize short term performance and also long term performance simultaneously is a very hard game to play.  We can choose to be smart in the short term or in the long term – but can’t choose both.  It’s a rare genius that can trade short term and invest long simultaneously.  Most people who claim they can do this lie about their returns.

Why did Franklin Templeton wind up Six credit funds?

Franklin Templeton Mutual Fund, on Thursday announced it would wind up six credit funds with a large exposure to higher-yielding, lower-rated credit securities. 

Why did they do so?  The Corporate Bond markets in India are fairly illiquid.   FT schemes have got impacted because they invested in papers with low credit rating (they actively took on credit risk).

Positioning portfolios in context of the Corona Virus (5)

As a follow up on the 2 scenarios we shared earlier on 18 March, the scenario likely to play out is perhaps something between Scenario 1 and Scenario 2 that we envisaged.   No one knows, “for sure”, the road map to normalization.   We are likely to see 2 steps forward and 1 step back approach based on “trial and error”.