How Rakesh Jhunjhunwala Earned 45,000 Crore ?

 

A college graduate having only 5000 rupees in his pocket thinks he is going to invest in the stock market. Then, because 5000 rupees were very less, he goes to ask his father for money. Due to which his father refuses to give him money. But no one could even imagine in their dreams that this same person will become India's biggest investor at some point in the future. This is a man they call India's Warren Buffet—Mr. Rakesh Jhunjhunwala. Mr. Rakesh Jhunjhunwala dies in August 2022. At this time, his net worth was 5.8 billion dollars, i.e., around 45,000 crores. But do you know that 35 years ago, he did not have any of this. Now the question arises: what did Rakesh Jhunjhunwala do to earn so much money? How did he become India's biggest investor? What is the truth about Rakesh Jhunjhunwala that most people do not know? I have earned the biggest amount of money in my life by selling shares. What shall I do with this money? If I give 200-500 crores to my child, then after that it is the same. I died earning the money. My son and daughter-in-law enjoyed it. Rakesh Jhunjhunwala, who started with just 5,000 rupees, became an investor idol in the country and foreign share market. How this is a very long story. So, let this story begin on 5 July 1960, when to Mr. Radhe Shyam Jhunjhunwala, an income tax officer was born, Rakesh Jhunjhunwala. Now, Rakesh was born in Hyderabad, but his antecedents came from the Jhunjhunwala district of Rajasthan. This constitutes the reason that, after all, Jhunjhunwala is named after him. Now, Rakesh's father was an income tax officer and, at the helm, a middle-class family. So, right from a very young age, Rakesh saw a lot of financial discussions at his house. The dining table used to be full of stocks, market movements, etc., with trading strategies. Seeing this in his very young age, Rakesh Jhunjhunwala developed experiences of interest in the stock market. And this passion of his can be seen in many of his academic activities as well. With the help of which, he got admission in Siddhanam College of Mumbai. It was actually a Mumbai college, very famous for studies in commerce and economics throughout India. Even Uday Kotak, Deepak Parekh of HDFC Bank, Kiki Vistri, or Kumar Mangalam Birla have all been students of this college. Now, after completing his college studies—in 1985—Rakesh Jhunjhunwala completes his degree in chartered accountancy; he gets much benefit from it. 1985 was an important year in Rakesh Jhunjhunwala's life. This was a time when he completed his Chartered Accountancy, and he takes his first plunge into the stock market in this year, 1985. Now, due to too much interest in the stock market since his childhood, Jhunjhunwala decides to work in it in the future. But here there was an issue that he had just graduated and he didn't have the money to invest. He goes to his father to ask for money after that. Now his father doesn't give him the money, but he does give him advice. He says that in future, whenever you borrow money from your friends and family don't invest it in the market even by mistake; otherwise, your life will get ruined. Now this was the time when Jhunjhunwala has to invest in the market but he has only 5000 rupees in his pocket. Then his brother comes in this movie and introduces him to some lady. Now this lady sees Rakesh Jhunjhunwala's interest in his Chartered Accountancy degree and the stock market. She gives him 2.5 lakh rupees, and in return, she asked him to only give her a good return on her money. Now when this happens with Rakesh Jhunjhunwala, then he becomes very happy. And when all this is going on, then he meets another person who is ready to give him another loan of 5 lakh rupees. Now when all this happens, the problem of Rakesh Jhunjhunwala's money gets solved. After that, he goes to 1986, and then comes his first step in the stock market; he purchases TATA Tea shares for 43 rupees. Now he had purchased 5000 shares of Tata Tea which in the next 3 months increased from 43 rupees to 143 rupees. Because of which Rakesh Jhunjhunwala's 2.16 lakh rupees investment amounted to 7.16 lakh rupees. And in this way, from 1986 to 1989 Rakesh Jhunjhunwala did many such trades with the help of which he increased his wealth to 50 lakh rupees. But in 1989, the same year Rakesh Jhunjhunwala played a very big game; having 50 lakh rupees, he took the leverage of the remaining money, and invested 1 crore rupees in a company called Sesa Goa, where he buys a total of 4 lakh shares of this company. Sesa Goa—actually, this company used to work in the iron ore industry, and the iron ore industry at that time was not performing very well due to which Mr. Jhunjhunwala gets the shares of this company for only 25 rupees. After some time, the price of the shares that was bought by Mr. Jhunnjunnwala starts increasing gradually. After which Mr. Jhunjhunwala is said to prepare for taking exit from these shares in three different parts where he sells his first lot of 2.5 lakh shares which he withdraws at the rate of 65 rupees. Thereafter, the second lot which he withdraws is at the rate of 165 rupees and the third lot that he withdraws is sold at the rate of 2,200 rupees. Now all these things that Mr. Jhunjhunwala did to Sesa Goa company with the help of which his net worth increases from 50 lakhs to 2.5 crores. Now this thing that he did was just start because his career's biggest trade was yet to happen. Now this year was 1989 when VP Singh's government prepares to launch a new budget. But the investors in the share market were not very happy about this budget. Now, this was because of the budget that VP Singh was going to introduce, and the people of the share market felt that this budget was not going to be business-friendly due to which the businesses would not flourish much and the chances of their investment in the share market growing is very less. That is why, before the budget of VP Singh is shared, too much fall in the market comes. On the other hand, Mr. Rakesh Jhunjhunwala took advantage of the whole scene and bought many company shares at very cheap rates. Now he did this because he felt that VP Singh already came from a business background, so bringing in such a budget would not be practically possible for businesses. So at a time when the rest of the people were selling their shares, Mr. Jhunjhunwala was buying those shares at very cheap rates. And after a little while, Mr. Jhunjhunwala's speculation regarding VP Singh came absolutely right. When VP Singh's government announced its budget finally, it was no less than a jackpot for them because their net worth of 2.5 crore had now increased to 50 crore. And it is how, within only 5 years of entering an investment market, Mr. Jhunjhunwala earned so much money that many people couldn't even earn in their entire life. But here there is a big catch, and that catch is that Mr. Jhunjhunwala couldn't do anything if the people who mentored him weren't with him because many of his decisions were made only because the people who mentored him were very powerful. See, the stock market runs on ups and downs every day because of which every day someone gets profit and someone gets a loss. But all these things will hardly be understood by a person who is new to this market. That is why Market Wolf makes it easy to be in the market. See, Market Wolf is a seriously wonderful trading platform for beginners, since you can start your trading journey with UDS 999 without any maintenance charge. Now, if you like easy and fast trading of options, then the best way to trade feature can really change your game. Let me show you how. Now, here I've selected Finifty because I think Finifty is going to go down. And as the premium movement in this one was very fast, I chose the faster one here. Here I use Wolf so this app automatically manages my risk and reward. I had placed my trade here, and I can see that in real time, the profit or amount of loss I am getting. You see, Market Wolf wants your profit to be maximized and your loss to be at least less. That is why they charge brokerage only when you book a profit. If you don't book a profit, by chance you get a loss, then no brokerage is taken. Furthermore, Market Wolf is a SEBI-registered platform, so you can rely on them. You are requested to find the link of the application in the description and also in the comment box given below. You can download it and use it there. Now, let's come back to the topic. Actually, what happened in 1985 is he, Mr. Jhunjhunwala, sat with a lot of brokers in Dalal Street and met a man. That man turned out to be none other than Radhakishan Damani. Mr Jhunjhunwala often says that he has been greatly influenced by many people but if any one has influenced him the most then it was Mr Radhakishan Damani. Mr Rakesh Jhujhunwala appreciates the power of patience in the listening of Radhakishan Damani. He himself used to say that this quality of Mr. Damani was very unique because I used to speaking but he was used to listening. And because of this, our connection became so strong. Mr. Jhunjhunwala says that I used to shout and say that I am very bullish about Tata Power but no one was listening to me. He was such a person who listened to me very easily and tried to understand me. Mr. Rakesh Jhunjhunwala has said this in many interviews that whatever I have learned about the stock market, I have learned everything from Mr. Damani. But apart from this, there was another person in his life whose name was Mr. Nimesh Shah. Mr. Nimesh Shah was one of the most reputed investors in the stock market, and he was the one to teach Mr. Jhunjhunwala the basic use of technical analysis and data. Even Mr. Jhunjhunwala shared his learnings of the stock market with the world in a magazine named Man's World in March 2002. He tells people that when he finished his CA, he used to start entering the stock market, doing all this in the stock market; in all these years, he understands that the quantity of the profit of a company matters more than the quality of that particular company's profit. He says that upon his entering into the stock market, he came across an extremely simple formula whose name was EPS into Price Earning or PE Ratio. The price of any share comes out if you multiply earnings per share with its price earning ratio. From this equation, he derives the lesson that with a rise in both earnings per share and the price earning ratio, the price of the stock of that company also rises. But Mr. Jhunjhunwala added that the EPS of every company is very company-specific. But here we cannot only see the EPS. Because its quality is more important than that particular EPS. And this quality is said to depend upon these three factors.1. Accounting Policies Followed by the Company2. Cash Profile of the Company3. Return on Capital Employed i.e. Efficient Use of Capital. Mr. Jhunjhunwala further added that besides EPS, the PE Ratio i.e. Price Earning Ratio is also Internal and External. It depends on both these factors. Now, coming to the internal factors, we get some things like 1. Company's Reward Record 2. Predictability of Earnings 3. Risk Model of Earnings 4. Perceived Growth Opportunity 5. Integrity of the Management i.e. How Honest is the Management of the Company. All these factors would depend upon a company's PE Ratio. He also told me that the stock market rewards companies that are leaders in the market, innovators, or heavy performers. And all this depends upon how much the addressable external opportunities are there in the market for a particular company. For example, how much Infosys will grow in the future depends on how fast the software opportunities in the global market are growing. Similarly, if it's a company like Colgate in toothpaste, then their growth will depend on how fast the toothpaste market is growing. Mr. Jhunjhunwala further added that when one wants to invest in a company, it's very essential to judge the competitive ability of a particular company. He just means to say that a company should be able to sell its product at affordable prices in a big market. And this I had not told. Indeed, Mr. Rakesh Jhunjhunwala published his article on his blog. Actually, with just this kind of knowledge, he has built an empire of 45,000 crores. But how did he do all these things? Let's understand this too. The year 1992 saw the start of an investment company by Mr. Rakesh Jhunjhunwala. The name of this company comes from Rakesh, and the letter RE from his wife, Rekha. So it combines and becomes Rare Enterprises. In earlier times, Mr. Rakesh Jhunjhunwala used both trading and investing strategies equally. Initially, when he didn't have any money, he used to trade, and later, when he earned that money, he started investing that money in different companies. And he completely quit trading for the growth of long-term wealth. His decision to shift to investing was the reason behind the establishment of Rare Enterprises. Now, during the early 1900s, there were many ups and downs in the Indian economy. For example, in 1991, there was a liberalization policy after which many foreign companies came to India and started setting up their business. But in 1992, Harshad Mehta's scam was exposed. And in 1993, Bombay Blast happened. Now, when all this was happening in India, Mr. Rakesh Jhunjhunwala and Radhakishan Damani both used to work under a man named Mr. Mannu Manek. Mannu Manek was a very powerful man. He was also dubbed as the person who controlled the whole Indian stock market in the 1970s and 1980s. As opined by Mr. Kishan Ratilal Choksi, proprietor of KR Choksi Shares and Securities, Mr. Mannu Manek used to be so strong once that no person's directorship for a company could get through without getting his seal of approval. He used to send letters to many companies during the election days of the directors, and all those people were made directors. But at that time, all this was possible because of not-so-strict regulations of CB. Mannu Manek used this to do many frauds and scams. This was the reason why the people of the stock market used to call him Black Cobra. But with the entry of Harshad Mehta into the stock market, Mannu Manek's influence started to dwindle. For Mannu Manek was a bear. He would make money when everybody else was out of the market. But Harshad Mehta was a bull. For when Harshad Mehta was in the market, it would rise rapidly and many people would earn money. Those were the days of Harshad Mehta, who used to take the shares of the ACC from Rs. 200 to 9000. The ever speedbuster stock market was running very fast from April 1, 1991, to May 1992. People used to think that all this was happening because Manmohan Singh brought the policies of liberalization. Because it was unknown to anybody that Harshad Mehta was breaking all the rules of RBI and SEBI and pumping money into the market. Because of which, the market used to rise rapidly. More clearly, Harshad Mehta had pumped so much money in those companies that the combined value of all those companies was more than the health and education budget of our country at that time. But when in 1992, journalist Suchita Dalal exposed this whole scam, then Mr. Mannu Manek and Radha Kishan Damani and Rakesh Jhunjhunwala got a lot of benefit from exposing this scam. Because all the stocks that Harshad Mehta pumped into the market, these three people started short-selling them. Suppose, for example, that when a stock is worth Rs. 500 it is sold at Rs. 500, and when it comes down to Rs. 200, then it is bought back from the market at Rs. 200, now Rs. 300 becomes the profit. In due course of time, few other companies turned into attention and Mr. Rakesh Jhunjhunwala started investing in companies like Titan Company. He started purchasing Titan Company shares from Rs. 32 in the period of 2002-2003. Slowly, since time kept on passing, he started building up his shares. But when in 2008, there was a financial crisis, he started selling some of his shares—the amount of 6 lakh from his total 44 lakh shares at that time. In 2012, he bought back the shares and increased his stake to 10.28 percent. As of the 2022 year, Rakesh Jhunjhunwala and his wife, Rekha, owned 5.05 percent in Titan Company, with a total value of Rs 11,081 crores. How did it all happen? Well, in the year 2002, the Titan Company's total value was approximately Rs 160 crores. Then, by 2022, this company's value leaped up to Rs 2,19,000 crores. Titan Company was not the only one Rakesh Jhunjhunwala had at his disposal. There was another company in which he had invested in heavily. This company was called Lupin. One pharmaceutical company was Lupin, whose market cap was Rs. 500 crores in 2003. By June 2008, this company's market cap increased to Rs. 4,000 crores. Due to this, Rakesh Jhunjhunwala's 4.29% stake in this company's value increased to Rs. 154 crores. By September 2021, this company's market cap increased to Rs. 44,000 crores. In 2003, Mr. Rakesh Jhunjhunwala invested in another company whose name was Crisil. He bought 10,000 shares of this company. The share price of this company was then in the range of Rs. 25 to Rs. 40. Later, he continued purchasing shares of this company on a yearly basis. Later, his total shares came to increase to Rs. 55 lakhs. However, the share price was nowBetween Rs. 200 and Rs. 300. Apart from this, Mr. Rakesh Jhunjhunwala had also played a huge role in Star Health and Allied Insurance. But he didn't invest only for the long term. Reality Rakesh Jhunjhunwala also invested for the short term. In April 2020, Rakesh Jhunjhunwala bought shares of Tata Motors at Rs. 65. Within 2.5 years, the stock of Tata Motors surged to Rs. 460. Now, when this happens, Rakesh Jhunjhunwala sells all his shares. But what did Rakesh Jhunjhunwala do to get such good returns? Obviously, to understand this, we have to understand his philosophy of stock picking. To understand that, we need to learn about his strategies for picking stocks. First would be the quality of management. According to Mr. Rakesh Jhunjhunwala, during investing the management quality is very important. If we see his favourite investment, Titan, he invested in this company because the management was very strong. They had a very stable business model, and the pace in which the company and the Indian market were growing was a very good option for them. The second thing he used to look at before investing was the time of sell. According to Mr. JhunJhunwala, there is no point to buy a stock, but there is always a correct time But he himself says how does he know the correct time? Well, the correct time is basically when PE i.e. the price earning ratio reaches an unresistible level. This said, it increases more than necessary. During the scam of Harshad Mehta, this strategy came into good use. Because even then he noticed that the stocks that Harshad had pumped, their PE ratio has now reached unsustainable level. And it has increased so much that it is certain to crash. So he immediately started short selling Now the third thing that he has always followed was diversification. Rakesh Jhunjhunwala's portfolio is very diversified. From jewellery to pharma to financial services, he has invested in many industries. Now, if we talk about 2022, there he has invested money in 23 different companies. And this is how he was able to play so long in this market. But apart from all this, his fourth strategy is considered the most important. And the name of that strategy was Checking on the Cash Reserves. For Mr. Jhunjhunwala, like Warren Buffet, cash reserves of any company are a very important asset. He always says that before investing in any company, check the cash reserves of that company. And he did exactly the same thing when he was investing in Crisil. That is why he chose to invest in Crisil rather than other companies. Now, there is an easy logic. He says that whenever any company has good cash reserves and the company is in trouble or there are changes in the market, then that company easily tackles that situation. But if a company does not have cash reserves, then that company will not be able to save itself from that particular situation. But apart from this, he also said that the timing of taking action in the stock market also plays a very important role. As soon as he came to know that Zee Entertainment and Sony are going to have a merger, he bought shares of Zee. When this merger was announced, within a few days, he sold shares of Zee and earned a profit of 50 crores. But now it's not that all his investments were very successful as the biggest investor also miscalculates. Like Rakesh Jhunjhunwala's first miscalculation was Dewan Housing and Finance Company. And this company proves to be one of his biggest mistakes. In 2013, Rakesh Jhunjhunwala bought 25 lakh shares of this company at a price of 135 rupees. But by 2019, this company completely goes bankrupt. And then something about this company comes out, and it is revealed that this company has been running a fraud for so many years. Now, similarly, Rakesh Jhunjhunwala makes another big mistake, which was called Mandana Retail. In 2016, Rakesh Jhunjhunwala acquires 12.7 percent stake of this company. And the price of this stock at that time used to be 247 rupees. But by December 2021, this company's stock price was only 16 rupees. Other than that, Rakesh Jhunjhunwala had invested money in DB Reality. However, this investment of his comes down to 32%. The problems Rakesh Jhunjhunwala had in his life do not end here. For besides taking losses from wrong investments, charges of insider trading have also been hurled at him. As it was in 2005, some family members of Rakesh Jhunjhunwala had acquired 10% stake in an IT company called Aptek. But then in September 2016, more than 100 crores are spent by the promoters of Aptek and 750,000 shares of this company are bought. Out of which, 250,000 shares are bought by Rakesh Jhunjhunwala's brother and the remaining 500 ,000 shares are bought by Rakesh Jhunjhunwala's sister. Now with this investment, he has a stake of 48 per cent due to which Jhunjhunwala gets this particular company's management control. But after a few days, Aptek announces that they are going to enter the pre-school education sector. Aptek's share prices suddenly went up by 10 per cent. And due to it, family of Jhunjhunwala earns a lot of money. However, in June 2020, Sebi sent a notice to Rakesh Jhunjhunwala and his wife, his siblings, his mother-in-law, a chartered accountant, Rare's CEO Utpal Seth, and his sister Ushma Seth, and Aptek's board member, Madhu Vadhera Jaya Kumar. All these investors come under Sebi's radar. And Sebi said that these people have done insider trading, which is illegal. Sebi says that they already knew that Rakesh Jhunjhunwala is going to increase his stake in this company and this company is going to enter the pre-school segment. But then on July 15, 2021, Sebi settles this whole matter. And in this settlement, Sebi closes the case without seeing who was right and who was wrong. But during this whole settlement, Rakesh Jhunjhunwala has to pay 18.5 crores. Now his wife has to pay 3.2 crores. Aptek's board members, Ramesh S Damani and Director Madhu Jaya Kumar, have to pay 6.2 crores and Rakesh Jhunjhunwala has to pay 1 .7 crores. And this matter is solved. Now Rakesh Jhunjhunwala has to face Sebi's inquiry too. But this doesn't effects his career. Even today, Mr. Rakesh Jhunjhunwala comes in the list of the biggest investors of our Indian stock market. But then came August 14, 2022—this is the day when Mr. Rakesh Jhunjhunwala leaves all of us behind and leaves this world. And at the time when he leaves this world, his investment value was more than 45000 crores. But there is one thing which even today very few people know about Rakesh Jhunjhunwala. He was a very big philanthropist. So, basically, Mr. Rakesh Jhunjhunwala, for the past several years, has been working on saving a number of children from malnutrition and providing education. Actually, even in August 2022, before his death, he donated about 13,90,000 rupees; because his target was that before leaving this world, he should donate at least 25% of his wealth for good causes. The cherry on top is that he does all of this in the year 2021. And this has been the story of our country's biggest stock market investor, which people till today did not know. And yes, if you also want to make your trading journey easier.