How did your initiation into stock markets happen?
I come from a middle-class background in Surat, and given the kind of constraints we saw in our early childhood, I always wanted to make a lot of money. When I was in college, I saw the Harshad Mehta boom playing out in 1991-92. My cousin was investing a bit in the markets at that time, and soon I started applying for some IPOs. I made some gains and started thinking that I was the smartest guy around as I was making money so easily even while studying in college. And then of course, reality dawns. So, I did get attracted to the market during the early 90s boom, and, of course, ended up losing money. I had borrowed some amount from my father and would invest in the names of my family members, using their bank accounts, but I was the decision maker. I lost a couple of lakhs of rupees, which was a huge amount back then. We were not well off, so it pinched a lot.
Can you name some of the IPOs that you investedin,around 1992?
I distinctly remember Prime Securities, which was considered a big blue-chip company in those days. There were companies such as Western Shipyard, Mafatlal Finance and KLGSystel. I still have many of those IPO certificates with me to remind me of my pain. I had invested in some 20 odd companies. The strategy at that point was mostly investing in IPOs. Most of them don’t even exist today.
What brought you to Mumbai? Were you investing back then?
Surat did not have much of an equity culture, especially from a knowledge acquisition perspective. I came to Bombay in 1996 and completed my Chartered Accountancy (CA) in 1997. I used to read a business daily everyday but did not invest or trade. Honestly, I didn’t have money as I was a student, but I was updating my knowledge. Once I did my CA, I worked for an industrial group for a year, and then joined ICICI Securities in 1998.
What kind of portfolio did you have when you were with ICICI Securities?
Till that time, I was not taking investing seriously. I was part of the mid-office team that sits between the sales and operations teams and takes care of new products and product designs. I used to listen to the sales team of the institutional equities business as they pitched ideas to their clients. At times, I would sneak into their meetings and listen to what the analysts were talking about. Given my interest in markets, I was given an opportunity to move to sales and start servicing clients. Then, a new project came as F&O (futures and options) was being permitted in India. So, I had to lead the implementation of the F&O project ati-Sec. We were the first one to start F&O in India in 2000, as a broker. IPO funding was also a new product at that time and I used to lead it. I was involved in conceptualization and execution of the first online trading platformICICIdirect.com. So, all those multiple diverse experiences in mid-office, F&O trading, IPO funding and research gave me a reasonably good understanding of how the markets function.
In the early 2000s, the tech boom was also in play. By then, I was a little bit more knowledgeable. So, when the 2001 crash happened, I lost 80% of my gains, but did not lose the capital.
And then you moved to Edelweiss.
In 2002, I joined Edelweiss. I first started building the derivatives business there. In those days, my mind was more of arbitrage and short-term trading, because those were the kind of clients we used to have; hedge funds and proprietary desks of the banks. I did that till 2005-07, and then the 2008 crash happened. Post that, I started spending more time oncashequities business, and in that process started with more time in the research department. Edelweiss fostered a good reading culture. So, people would discuss the books they read. There, I read many books likeOne up the Wall Street, Stock Market Wizards, Charlie Mungerand many more, which gave me exposure to different investing styles, long-term, short-term, combination of both, and I even started following or learning a little bit about technical charts. So, it gave me a good rounded experience.
When did serious investing happen?
I started deploying a good amount of capital in 2012. Till then, I’ve had limited capital.Also,a majorityof the net worth was invested in Edelweiss shares, since most of my savings would go into buying stock options. I would probably have had up to 90% of my capital in Edelweiss. In 2012, I started diversifying as I had acquired more knowledge and was little more confident, and that worked really well.
Did you firm up any investment strategy at the time?
In 2012, there was complete gloom and doom. But I thought, if one can identify some good companies, which are low market cap but operate in large opportunity size, and good quality management, then these companies can give good returns. Fortunately, I identified a few companies, which ended up becoming fairly big for me.
What motivated you to start your own investment firm?
Investing was something which had grown on me. Having come from a middle-class background, I always wanted to start a business of my own, and my wife Swati also wanted the same. I had a great time at Edelweiss. In 2018, the businesses I ran atEdelweiss,saw the best profits and best market share. I thought it was best to leave during a high and start your own business.
Coming to your current portfolio, how are you invested now?
I am primarily an equity guy and I am 95% into equities. The only other asset class I have is real estate that yields me rental income, which pays for my bills and my living expenses. I don’t have any fixed deposit or debt papers. Till the time I was working, my salary was taking care of my needs. Now, this real estate assetis supporting my expenses. As I’m also a money manager, most of my equity is held either directly or in our own funds.
How has your equity portfolio performed over the years?
I have made 25% plus kind of returns annualizedsince 2003-04.
What stocks helped build your wealth over the years?
I invested in 2012 in KEI industries; the market cap of that company was ₹75 crore, turnover was ₹1,500 crore,Ebitdawas around ₹175 crore and debt ₹500 crore. Today, it has ₹12,000crore market-cap. In 2012, I also identified chemicals as a key sector. So, we went with companies such as Aarti Industries, Atul and SRF. All of them are today in the ₹20,000-70,000 crore m-cap zone. Ihaveall these stocks in my portfolio since then.
How is your equity portfolio divided, and do you plan to change it?
I started out mostly with the mid- and small-caps. The flavor still remains largely mid-caps, because I feel you can make big money there. I have been increasing my large-capexposure,consistently. ICICI Bank, a large-cap, has become three times since 2019. Hindustan Unilever has in the past 10 years given 10-time returns. Having said that, it’s slightly harder to find big performers in large-caps. Currently, small- and mid-caps would be around 70-75% and rest would be large-caps.
Do you invest in international stocks?
Not really. I am extremely bullish on India. I think India is the best market right now in the world from the growth perspective. I also believe that the days of rupee depreciation are behind us. If I were to take a 10-year block or five-year block, I don’t think rupee will depreciate further. So, I’m bullish on rupee, I’m bullish on India.
What is your investment style?
One thing is very clear that big money is madewhen onlyyou bet money on the right promoters. Second, the businesses can become big where the opportunity size is not limited and there is tailwind in the sector. On top of it, I think what has worked well for me is that I can pick a trend early or see some gap between market perception and my perception. And when that re-rating happens, the stock can become very big. Today’s stock price can be tomorrow’s EPS. Magic happens when you capture both earning growth and valuation re-rating.Sokeep looking forthe magiccompanies.
Do you have life and health insurance?
I have a company-provided health cover and a personal one, too. I don’t have life insurance.
Were you able to go on a holiday in the past year? When do you plan to take a vacation next?
Last year in December, we went to Jim Corbett and Rishikesh; we covered the whole Uttarakhand area with friends and family. This summer, I took a small break in Dubai. The next vacation plan would be during Christmas.
How many months of emergency fund do you provide for?
A good part about equity as an asset class is that it’s liquid. You can borrowagainstit or even sell it. So, I don’t have a fund which is earmarked for emergencies.
One lifestyle change that you picked up duringlockdown thatwill become permanent now.
Covid has pushed my journey by a mile towards spirituality. I have learned to become a lot calmer and a lot more balanced about life. Plus, I have also made a commitment to make a difference to others and give back to society.
What does wealth mean to you?
Wealth is about your own and your family’s well-being, and giving them a comfortable lifestyle. I don’t have a luxurious lifestyle and I don’t intend to sort of get into ultra-luxury or something. I do believe that an entrepreneur who’s building business has a huge impact in terms of employment generation.So,wealth gives you the opportunity to do a larger good either through entrepreneurship or social service.
How would you identify or describe yourself as an investor?
I am still a novice and learning every single day. I consider myself a common-sense driven investor. I don’t think one needs to have a lot of technical knowledge to make money. You can hire technical knowledge but not common sense.