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Dalal Street Big Bull Rakesh Jhunjhunwala Passed at age of 62

 For someone who made his first big killing by short selling shares at the peak of the 1992 bull market, and then again during the dot com boom of 2001, the moniker of Big Bull against his name would have sometimes left Rakesh Jhunjhunwala amused at the twists of destiny during his three and half decade journey on Dalal Street. Twice he came close to losing it all, only to have Lady Luck back by his side in time to be able to emerge stronger.

The outspoken billionaire investor, trader, entrepreneur, philanthropist, and raconteur (with a penchant for risqué one-liners) died in Mumbai of cardiac arrest. A long-time diabetic, Jhunjhunwala’s health took a sudden turn for the worse over the last couple of months. This time Lady Luck chose to look the other way.

Jhunjhunwala was 62 and is survived by his wife Rekha, two sons, and a daughter.

Son of a senior income tax official, Rakesh Jhunjhunwala was a chartered accountant by training. He began his career in the stock market in 1985, initially by investing money borrowed at very high rates of interest. A client of Jhunjhunwala’s brother handed him Rs 2.5 lakh at 18 percent annum.

Another gentleman by the name of Mendoza handed him Rs 5 lakh and refused to accept any collateral, unlike many others who insisted on some form of security. (Touched by the gesture, Jhunjhunwala would pay him 24 percent interest annually till many years later though he was no longer obliged to.)

Jhunjhunwala invested the funds in Tata Power, and it paid off well. He was on a winning streak for a while, allowing him to build his own capital buffer. But a middling run followed soon after, and Jhunjhunwala struggled for the next couple of years. In later interviews, Jhunjhunwala was candid enough to admit that he could hang in there only because his father was taking care of the household expenses.

Things started looking up for Jhunjhunwala after a big bet on Sesa Goa, an idea suggested to him by a friend and fellow market player Shailesh Bajaj.

But an even bolder gamble was on the VP Singh-led Janata Dal’s maiden Budget in 1990. Jhunjhunwala bet the house, convinced that the Budget was likely to be business and market-friendly, and not one with socialist overtones, as the market was fearing.

“VP Singh was a Thakur and understood the business well, so I was confident that he would not do something that would hurt the market,” Rakesh had said in one of his interviews.

The bet paid off handsomely and he returned home with good news for his wife that she could finally buy the air conditioner she had been asking for.

RJ's defining move in career

The defining move of his career came a couple of years later when he joined ranks with the market players who felt that the manic bull market of 1991-92 was unsustainable. Harshad Mehta, the then Big Bull of Dalal Street was spearheading the charge of the bulls, driving shares of companies to dizzying highs irrespective of their fundamentals.

At that time, Jhunjhunwala; however, was still a cub in that camp of bears that had veterans like Manu Manek, Ajay Kayan, and Hemedra Kothari in the midst. All the bears had profited from the upswing initially but quickly came to the conclusion that the lofty valuations could no longer be justified.

Nearly every single member of that cartel, including Jhunjhunwala, was on the edge of ruin, as share prices continued to rise one way despite the spirited efforts of the bears to hammer the stocks through short selling. Eventually, the bears won: shares went into a free fall after it came to light that Harshad Mehta had been ramping up stock prices using bank funds. Jhunjhunwala said he made around Rs 30 crore on his bearish bets.

Having accumulated a tidy pile, Jhunjhunwala turned his attention to identifying stocks that would create wealth in the long run. Seven years of trading would have made him realize that it was something to be practised on the side-the big money could be made only by investing in fundamentally sound companies and reaping the benefits over time. After all, the early birds in MNC stocks like Hindustan Lever, Nestle, and Glaxo, to name a few, were pulling in good money every year through dividends alone.

His mentors

Jhunjhunwala was influenced by value investors like the late Chandrakant Sampat, Radhakishan Damani, and Kamal Kabra among others. But it was the taciturn Damani who left an impression on the young Jhunjhunwala and would remain a mentor to him till the end.

“It is like a relationship very difficult to define,” Jhunjhunwala had said in one of his interviews with CNBCTV18.

“I do not know without my father and him I do not know where I would be. He has really taught me in life and more than that human nature. He has taught me there is nothing greater in life than parents, to react coolly to everything and not to be afraid of anything. And the patience he has to hear other person’s point of view is unbelievable,” Jhunjhunwala said.

So thick were the two that in the 90s, fellow brokers and traders spoke of them in the same breath as GS-Rakesh, never mind the fact that the duo often had conflicting views on the same stock. (Radhakishan Damani was referred to by his family’s BSE broking card- GS Damani).

Between them, Jhunjhunwala and Damani owned a portfolio of some of the finest MNC companies—consumer and pharma mostly- in the 90s. But the traders in them were still alive and kicking, looking for short-term profits whenever possible.

So when Harshad Mehta attempted a comeback in the late 90s, it was inevitable that the duo would face off with him at some point, given their diametrically opposite views on valuation. That deciding battle took place in 1998. True to form, Mehta, ramped up the prices of Videocon, Sterlite, and BPL, with some help from the management.

Convinced that the stock prices did not justify the sky-high valuations, Damani and Jhunjhunwala started short-selling the shares. They lost money initially, but eventually emerged triumphant once Mehta was no longer able to support the prices. Prices of all three stocks went into a tailspin, and would not recover for a long time. This time, the erstwhile Big Bull had been sent packing for good.

Less than a couple of years later, Jhunjhunwala was back to doing what he was best known for—targeting stocks of companies he thought to be overvalued. And this time, he was locked in a battle with the upcoming Big Bull of Dalal Street, Ketan Parekh.

Never a fan of technology shares, Jhunjhunwala short sold shares of Parekh’s pet favourites, Himachal Futuristics and Global Telesystems, convinced that the valuations could not sustain. But this time, Jhunjhunwala got his bets horribly wrong.

The stocks rallied for much longer than he had anticipated, and there he was, once again on edge of ruin. Like the previous time, he eventually won when the inevitable meltdown in prices followed at the end of the bull markets. And while his strategy was profitable, it was not good enough to keep him out of the cross hairs of the regulator. Jhunjhunwala and his mentor Damani were accused of market manipulation through the hammering of share prices by unfair means. (Jhunjhunwala would later be exonerated of the charges)

The end of the bull market of 2001 also seemed to have changed Jhunjhunwala’s approach to trading and investing. He now wanted to be seen more as an investor and less of a trader. Investing in the right kind of companies helped burnish that image.

Through repeated short-term bets in these stocks, his average cost of acquisition in many stocks was negligible, and in some cases, after factoring in dividends, splits, and bonuses, even negative. And no longer would he be seen as Damani’s alter ego. It would be Rakesh henceforth, and not GS Rakesh. By then, Damani too had cut down on his stock market plays and was focused on building a retail chain.

“I have rarely seen somebody so versatile—he was an excellent investor, very good at trading and a venture capitalist as well,” Nemish Shah, co-founder of ENAM Holdings told Moneycontrol.

“He understood companies in great depth, and you could see that from the quality of stocks he chose. More than all that, he was a wonderful human being. He was known to be short-tempered, but at the same time I can’t count the number of traders and brokers he has helped during their times of crises,” Shah said.

One-time rival Ketan Parekh too spoke highly of Jhunjhunwala’s conviction as a trader and investor.

“He had the tenacity, which is quite important to succeeding as an investor and trader,” Parekh said.

“Once he was convinced about something, he would double down and hang in there for as long as he could. That takes some doing….and you can see the results in a stock like Titan," Parekh added.

Parekh and Jhunjhunwala may have been arch rivals at the peak of the technology rally of 1999-00, but were on talking terms in recent years, even playing cards on the same table at parties hosted by common friends.

I don't have good habits...

Besides his temper problem, Jhunjhunwala also made no bones about his weakness for the fine things that life had to offer. “I don't have good habits. I smoke like a chimney, drink like a fish, eat like a pig. I don't exercise. So ya, my health worries me,” he once said in an interview with a tabloid in 2013.

Ironical, one would think, considering that the same discipline that made Jhunjhunwala a successful trader and investor was missing when it came to his health habits.

Not that he did not make efforts. “I made a lot of resolutions on my habits and they all failed,” he said in an interview on his 50th birthday.

To well-wishers who advised him to take care of his health, his response was philosophical. “Having come here you are anyway going to die. Might as well have a good time when you are at it.”

Incidentally, United Spirits (then McDowells) and United Breweries were among his biggest holdings when the market was yet to recognise the true worth of stocks. His simple reasoning was that as societies became prosperous demand for liquor would only grow. The stocks went on to become multi-baggers, making handsome profits for him.

His outspoken manner made for good interviews and catchy headlines; you won’t find too many people in his position talking about ‘hot’ female actors on national television. And finesse was not his forte while airing his views at public forums. At a conclave hosted by a general television channel last year, Jhunjhunwala said that new businesses were grossly overvalued and should be sold. But at the same time, he also advised caution in his own unique style.

“Par abhi nahin karne ka. Chaddi nikal jayegi,” he said. (But don’t do it now, you will lose your shorts)  For all the TRPs and page views a Jhunjhunwala interview would bring, he could quickly turn on journalists without warning if their line of questioning annoyed him. Something that even people outside of journalism thought to be in poor taste.

“He was someone who wore his heart on his sleeve,” said Sharad Shah, another of Jhunjhunwala’s contemporaries. “What was on his mind is what was on his tongue. Most people seemed put off by his bluntness, but then you don’t see too many people who are not afraid to call a spade a spade,” Shah said.

And while Jhunjhunwala made a fortune in stocks like Titan, CRISIL, and initially Lupin, there were plenty of lemons in his portfolio as well, something no investor, however intelligent, experienced, or lucky, can escape.

RJ's tryst with IT stocks

His brush with technology almost ended in disaster every time. After a miserable experience with IT stocks during the dot-com boom, Jhunjhunwala took a bullish view on NIIT even as the tide for IT services stocks were beginning to turn.

He waxed eloquent about the stock but was in for a rude shock when the promoters trimmed their stake in the company without warning. An infuriated Jhunjhunwala dumped the stock soon after, only to be rewarded with some insult on top of injury.

He was pulled up by SEBI who wanted to know why he had heaped praise on the stock a few weeks back at a public forum only to change his view so soon.

His tryst with Geometric Software too ended on a sour note, after he had to settle with SEBI for an insider trading charge. The same was the case with Aptech as well, in which Jhunjhunwala was one of the promoters. Once again, adding insult to injury was the fact that Aptech has been among the biggest laggards in the IT sector for much of the time since Jhunjhunwala took over the reins.

In 2010, his attempt to take A2Z Maintenance and Engineering Services public came into a cropper. Disregarding the advice of close friends, Jhunjhunwala pushed the management to go ahead with the Initial Public Offering in a weak market, and even leaned on some of his friends and associates to ensure that the issue was fully subscribed.

A2Z had a disastrous debut on the bourses and went on to join the ranks of penny stocks within a few years. There are plenty of other duds as well-HOEC, Bilcare, Sayaji Hotels, DB Realty, and Pipavav Defence, to name a few. This apart, some of the initial successes like Lupin and Karur Vysya Bank have faltered over the past few years.

On comparison with Warren Buffett

Jhunjhunwala was often compared to Warren Buffet, a comparison, he did not relish (at least in public). Also, he bristled at any questions relating to his net worth. Oil Baron John Getty’s quote “If you can count it, you don’t have it,” was Jhunjhunwala’s stock response to any such query.

Jhunjhunwala has a massive following among retail investors who hang on to every word of his, hoping to make a fortune someday by imitating his playbook. Strangely, Jhunjhunwala himself has repeatedly said that nobody should buy a stock if the only reason was that some big-name investor had put money in it.

His critics say that Jhunjhunwala’s reputation is more of past glory, resting on a handful of early bets and that he has not had another winner on the scale of Titan.

And yet there is a commonly asked question in financial markets, the answer to which decides how an investor should be judged.

“How much money did you make when you were right and how much did you lose when you were wrong?”

On that parameter, Jhunjhunwala’s score card speaks for itself. The value of his 5 percent stake in Titan alone is worth over Rs 11,000 crore at the current market price and accounts for nearly a third of his portfolio value of listed companies.

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