Ace investor Rakesh Jhunjhunwala's journey, views on startup valuations

Veteran stock market investor Rakesh Jhunjhunwala passed away on Sunday morning due to cardiac arrest.

Often referred to as "India's Warren Buffett" and the "Big Bull" of Indian markets, Jhunjhunwala's net worth was $5.8 billion, according to Forbes.

He had recently teamed up with former Jet Airways CEO Vinay Dube and former IndiGo head Aditya Ghosh to launch Akasa Air—India's newest budget carrier. The airline began commercial operations this month with a maiden flight from Mumbai to Ahmedabad.

Views on valuation hangover

Rakesh Jhunjhunwala often said that startup valuations are absurd.

In 2019, while addressing the TiECON Summit in Mumbai, speaking to a gathering of startup founders keen on understanding how one can become a billionaire investor, Jhunjhunwala said, "Focus on the long run and create value for investors and employees." He added that Indians need to be more original in their thinking while setting up companies.

During an interview with Bloomberg Quint in July last year, Jhunjhunwala pointed out that the present enthusiasm surrounding startups was temporary and the future holds something entirely different.

When asked about the skyrocketing startup valuations, he said, "I don’t want to go to the startup party as the hangover is only for two days." According to him, business models and sustainability hold more importance than valuations.

His portfolio includes companies like Star Health, Titan, Rallis India, Escorts, Canara Bank, Indian Hotels Company, Agro Tech Foods, Nazara Technologies, and Tata Motors.

Overall, he had a stake in 47 companies at the end of the June quarter. Titan, Star Health, Tata Motors, and Metro Brands were some of his largest holdings.

He suggested that startups need to focus on a business model that produces cash.

Stressing over the sustainability of a business, he said that capital is not important; it is about the business model. "I am only interested in business models," said Jhunjhunwala.

"If the race is on, it is the tortoise that wins, not the hare," he said.

Taking a dig at investors betting on startups, Jhunjhunwala said that investors are being misled by valuation numbers. "People are being 'far far far' too optimistic about how quickly these companies will make cash," he said.

He also believed that it's not investors that build the great companies of the world. "A company needs the opportunity for corporate governance, technology, frugality, the ability to change," he added.

A billion-dollar ride

Born on July 5, 1960, Jhunjhunwala grew up in Bombay, where his father worked as a commissioner of Income Tax. He graduated from Sydenham College and thereafter enrolled at the Institute of Chartered Accountants of India.

He later chose Dalal Street instead of auditing accounts. In 1985, Jhunjhunwala invested Rs 5,000 as capital. By September 2018, that capital had inflated to Rs 11,000 crore.

The veteran investor earned his first big profit in 1986 when he bought 5,000 shares of Tata Tea at Rs 43 and the stock rose to Rs 143 within three months. In three years, he earned Rs 20–25 lakh.

Jhunjhunwala was the chairman of Hungama Media and Aptech and was on the board of directors of firms such as Viceroy Hotels, Concord Biotech, Provogue India and Geojit Financial Services. His privately owned stock trading firm, Rare Enterprises, derived its name from the first two initials of his name and that of his wife, Rekha, who is also a stock market investor.

An investor with a Midas touch, Jhunjhunwala was the 36th richest man in the country.

(With inputs from PTI)