RARE: The 'RJ' commandments, beyond hot investing tips and market noise

This book on understanding the mind of one of India's most famous strategic investors is a valuable read - but not if you are looking for a hot tip

RARE – Investing the Rakesh Jhunjhunwala Way

By Nandini Vijayaraghavan

Published by Westland

368 pages  ₹799

 

I vividly remember this incident. It was in the early 1990s, post liberalisation. I was at a magazine stall in Chennai, hoping to pick up a few application forms for good upcoming initial public offerings (IPOs). Yes, in Chennai these forms were widely distributed across various types of outlets including magazine stalls. As I was browsing, I saw an autorickshaw screech to a halt outside the stall; the khaki-clad autorickshaw driver stormed in and asked me “Edhula Podalam Saar” (On what can I put my money, sir?). I told him that he may be better off buying a lottery ticket than betting on a hot IPO where allocation was a gamble akin to a lottery.

 

I was reminded of this incident as I was reading RARE – Investing The Rakesh Jhunjhunwala Way by Nandini Vijayaraghavan. In the chapter titled “Mahalakshmi Race Course and Arthur Road Jail”, the author says ,“A tale that RJ (Rakesh Jhunjhunwala) often narrated goes: ‘I was drinking at Geoffrey’s when a pretty girl walked up to me and asked ‘Give me a tip to double my investment in three years’. I told her ‘Go to Mahalakshmi Race Course’.”

 

The author is a Singapore-based financial analyst whose columns appear in various leading newspapers. She has done meticulous research to put together this book on RJ and his investment strategies. The book boasts of a foreword by Bhaskar Bhat, former managing director of Titan Industries, a company that RJ backed to the hilt.

 

If you expect to pick up some “quick tips” on tripling your money in three years after reading the book, banish the thought. But if you are looking to understand how financial analysts look at company performance, then this is a book for you.

 

Interestingly, the author points out that RJ started his stock market activities around the same time as two other famous bulls: Harshad Mehta and Ketan Parekh. Harshad Mehta is six years older than RJ while Ketan Parekh six years younger. The book starts with what the author calls an “affectionate history” of Dalal Street. Over 25 pages she paints an interesting picture of the Bombay Stock Exchange (BSE) and the birth of the National Stock Exchange (NSE). To set the context on how bulls operate and sometimes go wild, the book dedicates two chapters, one each, to the rise and fall of Harshad Mehta and Ketan Parekh.

 

We then get into the world of RJ and his business model and ascent. In the chapter titled “The Legend, The Myth, The Man” we get to know about the many passions of RJ, including Bollywood film production.

 

Part 2 of the book is a deeper examination of the listed equity shares that RJ invested in. I was delighted to read how RJ was a big believer of the Tata Group (a group with which I have personally had many wonderful interactions during and after my days in advertising). The diamond that he picked and bet on heavily was Titan. That gets a full chapter. The section also talks about the other Tata companies in which RJ invested, as well as companies in the pharma and banking sectors. All these chapters are replete with a great deal of financial detail, some of which went over my head.

 

Part 3 looks at RJ’s private equity investments. The big jackpot (no, not at Mahalakshmi Race Course) was RJ’s investment in Star Health; when the company did an IPO, it swelled RJ’s net worth by a significant amount. There were a few others such as Nazara Technologies, which also “popped” for RJ. This section explains how RJ trusted the founders and not just the spreadsheets that companies offer to private equity investors. The last part is a mix of RJ’s legacy, his quotable quotes and how the portfolio has performed since his death. The author’s research has also unearthed the 10 commandments by which RJ lived his life: Be Law abiding (RJ has been fined by the Securities and Exchange Board of India for some violations; he paid the fine and moved on, the author reiterates); Be aware; Monitor investments; Diversify (RJ reduced his holdings in Titan when it became so big that it overshadowed all his other investments); Borrow cautiously (unlike Harshad Mehta and Ketan Parekh); Manage risks; Do not time the market (advice that people such as Warren  Buffett and his guru Benjamin Graham have repeatedly proffered); Do not imitate; Be emotionless; and Decide amid uncertainties.

 

The chapter “Thus Spake RJ” is full of interesting observations. So let me end this review with an interesting quote. When asked whether to invest in small caps or large caps, RJ is said to have replied, “Invest in small caps that are going to become large caps.”

 

If you are interested in the stock market and understanding the mind of a strategic investor, this book is a valuable read. If, on the other hand, you are looking for a hot tip, better buy a lottery ticket or head to Mahalakshmi Race Course.

 

The reviewer is a branding and advertising veteran whose latest book  Marketing Mixology offers four essential skills for marketing success