Market selloff? Jhunjhunwala shows the way

Talking head

It's very natural to lose your nerve at a time when stock investors are running for cover.

But ace investor Rakesh Jhunjhunwala belongs to a different tribe, who seems to have other plans. It's business as usual for Jhunjhunwala, who is a classic example of how to keep a cool head in times of selloff.

The reverse pitch

Consider this. There are 27 stocks where Jhunjhunwala and his better half Rekha Jhunjhunwala held more than 1 per cent stake at the end of the September quarter. All barring MCX have been in the red since July 1. Some of his portfolio stocks have cracked up to 70 per cent since July 1 amid worries over India’s shadow banking crisis and geopolitical concerns involving Saudi Arabia, Italy and Brexit. Still, the Big Bull stood his ground and is busy picking low-hanging fruits!

DHFL: Keeping faith

Dewan Housing Finance is the worst-hit stock in his portfolio during the quarter. But guess what? Jhunjhunwala accumulated more shares of Dewan Housing Finance! His holding in the housing finance firm went up by 39 bps to 3.19 per cent at the end of the September quarter, from 2.8 per cent at the end of the June quarter.

It has been a steady innings

Jhunjhunwala has been holding the DHFL stock at least since 2013, data available with Ace Equity shows. The benchmark Sensex, which climbed 6.16 per cent and 2.76 per cent in July and August, slipped 6.25 per cent in September after a debt default by the IL&FS group triggered fears of a liquidity crisis.

There are more...

TV18 Broadcast is one for sure. The renowned investor bought an additional 62.5 lakh shares, or 0.4 per cent stake, in TV18 Broadcast, raising his holding to 3 per cent from 2.6 per cent in April-June. This scrip has fallen 31 per cent since July 1.

Jhunjhunwala also purchased 5 lakh shares in Jubilant Life Sciences during the quarter, upping his stake to 1.6 per cent from 1.3 per cent. In Escorts, he bought 42,368 shares, taking his holding to 8.2 per cent from 8.1 per cent.

In SpiceJet, he held 1.3 per cent stake at the end of the September quarter. He last held 1.9 per cent stake in the aviation stock at the end of June quarter of 2014.

Besides, he held 2.4 per cent stake in Fortis Healthcare at the end of September quarter. It was at 1 per cent in the December quarter of 2016, when he last figured among shareholders holding 1 per cent stake or more stake in the company.

Watch your step

The Big Bull kept his holdings intact in Titan, his biggest known investment in stocks. But he scaled it down in Jaiprakash Associates to 1.1 per cent, from 2.1 per cent.

Rallis India and Lupin are where he sold 7 lakh and 5 lakh shares, respectively. Jhunjhunwala had 3.22 per cent stake in Anant Raj at the end of June quarter. His name was missing in the September quarter shareholding pattern.

Rainmaker in Kotak can make IL&FS fix easy for government

The government’s choice of Uday Kotak to lift the multi-billion Infrastructure Leasing & Financial Services Ltd out of bankruptcy should be no surprise. He is one of the few bankers in the country who have navigated banking crises successfully not once, but at least thrice.

Even for Uday Kotak — who witnessed the Harshad Mehta scandal in the early 1990s, the CRB scam, the bursting of the tech bubble and the post Lehman credit crisis — the job at hand is of monstrous proportion. The balance sheet size of IL&FS is Rs 1,15,815 crore.

What is Kotak’s selling point? A sense of caution. When many bankers were getting carried away by the growth opportunities from infrastructure lending, Kotak saw what all could go wrong. And everything has unfolded just the way he anticipated.

Thanks to his belief that banks are not designed to lend to infrastructure, his bank managed to keep bad loans low at 2.17% of total bad loans when it was 10.69% for India’s largest lender State Bank of India.

One of Kotak’s jobs is to untangle the numerous subsidiaries and associate companies which have mushroomed over the years under IL&FS. Should he aim to revive the institution, or seek moratorium on payments, sell assets and pay as and when an asset is monetised? That’s a difficult question to answer, but the rainmaker in Kotak could make it easy for government.

His instinct for deal making is legendary — from selling the ‘Good Knight’ mosquito coil brand to Godrej, to stepping in to buy a controversial stake in Asian Paints on behalf of UK’s ICI, to the takeover of ING Vysya Bank — all testify to his ability to sell assets at a valuation that few would complain about.

A key principle that Kotak has kept as a bedrock of his business is to keep it simple. That helps him see the risks associated with complicated lending practices and instruments that could initially appear exotic but blow up during times of stress.

While his business has thrived for more than three decades during the ups and downs of the Indian economic cycle, Kotak’s desire to live through the tests could help him overcome the obstacles at IL&FS too.

“If what you create does not outlive you, then you have failed,” Kotak had told ET in an interview. “The thing that excited me then, and that excites me now, is the fun in the journey, and not the destination.”

Over a period, Kotak Mahindra Bank has become a lender with a market value of Rs 2.14 lakh crore, but what has guided Kotak has been the belief that he has to fend for himself and ‘there’s no big brother’ to bail him out. The task before him now is challenging and he will need all his wits to revive IL&FS and bring down its debt.