The ace investor is known to be averse towards the new-age internet companies, which have no cash flow or very little of it, are burning a lot of capital and yet getting eye-popping valuations simply because they are perceived to be in large markets and have good positioning there.
This February, he told ETNow that he would not like to pay much money for such companies. “There, you are discounting a large part of the future into the present. Look at Uber; after going public, the stock never really went up. I am not personally very keen on internet companies, but people have made money in some of them. Good luck to them,” he said.
Yet, the Big Bull is betting big on ‘mobiles and millennials’ in his own way, as can be noticed in some of his recent investments.
Mobile gaming firm Nazara, a venture the Big Bull backs, hit the market on Wednesday with an initial public offering (IPO).
Jhunjhunwala’s interest in the gaming industry is nothing new. He is also key stakeholder in Delta Corp, the only listed casino and gaming company in the country.
This past fortnight, the ace investor made a bid to enter India’s fast-growing mutual fund business, a bet on the rapid spread of the equity culture in the country. Alchemy Capital Management, a firm co-founded by Rakesh Jhunjhunwala, has applied for a mutual fund licence from capital markets regulator Sebi.
These developments came at a time when Dalal Street has been seeing a retail frenzy and a significant rise in the number of new equity investors. The success of niche digital-focused businesses such as Affla India, IndiaMART Intermesh and Route Mobile is also giving the ‘digital theme’ more primacy.
India saw significant rise in digital adoption during the Covid-19 lockdown period, thanks to low cost data and increased smartphone penetration.
Some investors on Dalal Street tend to show increased confidence in stocks to which the Big Bull has significant exposure. The ace investor, often call the investor with a Midas touch, is also known to have a set of very tough screening norms for companies that he invests in. One key criterion for him is free cash flow, a screener many of the new-age companies fail to clear.
Nazara Founder and Managing Director Nitish Mittersain says his team’s ability to persevere without giving up, have long-term commitment to the idea and the focus on cash flow despite being a technology firm seem to have impressed the ace investor.
The Big Bull’s interest in the mutual fund business has also not gone unnoticed, as the competition in the mutual funds industry is expected to grow more intense after the market regulator recently relaxed ownership norms for sponsors of fund houses.
Yet, equity — as with gaming – remains an under-penetrated domain in India, and thus offers a lot of growth potential.
“It makes a lot of sense to get into the AMC business for an investment stalwart like him, as a new generation is getting attracted to equity thanks to rapid wealth creation in recent times,” said G Chokkalingam, founder, Equinomics Research and advisory.
Financial advisers, however, warn that blindly following in the footsteps of a top investor can be risky for retail investors.
While the Big Bull is known for identifying multibaggers in the midcap and smallcap space at an early stage, one should never try to ape anyone blindly.
“Never neglect valuations, screen the business models and management keenly. If one can find a combination of good ratings on these three counts, then it can be worth playing,” Chokkalingam said.
