INTRODUCTION
Rakesh Jhunjhunwala, often hailed as 'India's Warren Buffett,' achieved acclaim not merely for his substantial wealth accumulation, totaling an approximate Rs. 38,000 crores, but for his exceptional acumen in Stock Trading and his adept utilization of Technical Analysis methodologies. However, the intricacies of his ascendancy to success, the pivotal decisions shaping his illustrious career, and the specific factors propelling him into the echelons of the world's most accomplished traders remain relatively obscure.
This discourse aims to illuminate the narrative surrounding two seminal stocks that played an instrumental role in establishing Rakesh Jhunjhunwala as a preeminent figure in contemporary Stock Trading. The financial behemoths in question, Titan and CRISIL, stand as exemplars of strategic investments that precipitated Jhunjhunwala's considerable fortune.
It is essential to note that while our focus is directed towards comprehending the dynamics of these two stocks, one should acknowledge the expansive nature of astute investors such as Mr. Jhunjhunwala. His portfolio extends beyond 25 diverse companies, each strategically chosen. Nonetheless, the spotlight on Titan and CRISIL is justified by their consistent performance, emblematic of the judicious decision-making that characterizes Mr. Jhunjhunwala's investment philosophy.
1.1 THE STORY OF TITAN
The Genesis of Titan: An Evolutionary Tale
The establishment of Titan in 1984 marked the convergence of visionary entities—Tamil Nadu Industrial Development Corporation (TIDCO) and the venerable Tatas—in a strategic joint venture. Seeking pivotal financial support, the project garnered endorsement from the International Finance Corporation (IFC), a counterpart to the World Bank based in Washington DC. This marked the genesis of a dynamic entity, with its inaugural manufacturing facility situated in Hosur and headquarters established in Bangalore.
The Vicissitudes of Titan's Trajectory
From its inception, Titan carved its niche as a premium brand. However, the trajectory was not devoid of challenges. Venturing into the European market proved to be a formidable task, as Titan, accustomed to operating in a monopolistic environment in India, faced difficulties aligning with the exacting standards of European watch retailing. The ramifications were starkly evident in financial metrics, with net profits plummeting from Rs 23.5 crore in 2000-01 to a mere 11.5 crore in 2002-03. The consequential decision to cease European operations in 2004, amidst accumulated losses totaling 182 crores, underscored the resilience of Titan's Indian operations, which continued to yield profitability.
Bhaskar Bhat's Catalytic Leadership
A pivotal juncture in Titan's narrative unfolded with the appointment of Bhaskar Bhat as Managing Director in 2002, redefining the company's trajectory. Upon his entry, Titan's valuation stood modestly at 220 crores. Presently, it stands at a staggering 2,18,000 crores, positioning Titan as the second-largest entity within the Tata conglomerate, surpassed only by Tata Consulting Services (TCS). Titan's principal competitor during this epoch was Hindustan Machine Tools (HMT), specializing in analogue watches.
Titan's strategic adoption of advanced quartz technology, coupled with a repositioning as a fashion statement targeting a younger demographic, set it apart from HMT's utilitarian offerings, solely facilitating timekeeping. A distinctive decision to directly engage with retailers, circumventing intermediaries, further distinguished Titan's approach.
Unconventionally accepting only advance payments, Titan's foresight in tying retailers' capital to its inventory, initially met with resistance but ultimately proved instrumental in shaping its early financial success.
This strategy not only attracted entrepreneurs from diverse sectors to establish retail outlets but also promised enhanced margins sans intermediaries. Commencing with watches, Titan diversified its portfolio, introducing Tanishq in 1995 and subsequently expanding into eyewear with Titan EyePlus and fragrances under the Skinn brand.
The Tale of Tanishq: Navigating Purity and Trust
In the mid-1990s, the genesis of Tanishq materialized from Xerxes Desai's visit to the World Watch and Jewelry Show in Mumbai. The nomenclature itself, derived from 'Ta' (Tata) and 'nishk' (Sanskrit for ornament), embodied the Tata group's foray into jewelry. Yet, Tanishq faced initial challenges in capturing a distinct market share, contending with entrenched preferences for traditional family jewelers.
Recognizing the predilection for 22-karat gold among Indian consumers, Tanishq recalibrated its offerings, aligning with indigenous designs and themes.
Tanishq's groundbreaking approach involved the incorporation of karat meter machines, a significant capital investment. This innovation, while ensuring purity, led to a revelation: 58% of examined jewelry fell below the 22-karat gold threshold.
To instill confidence, Tanishq initiated a revolutionary exchange program, guaranteeing 22-karat gold for any piece above 19-karat, a strategy that resonated profoundly with consumers. Even during a period of economic slowdown between 2013 and 2016, Tanishq demonstrated adaptability by introducing gold exchange schemes and reducing making charges.
Rakesh Jhunjhunwala's Strategic Investment
Rakesh Jhunjhunwala's foray into Titan's shares commenced in 2001-02, with a significant acquisition at Rs 30-32 per share. Accumulating approximately 12.5 lakh shares despite market fluctuations, Jhunjhunwala's foresight anticipated India's growth, retaining confidence in Titan even during price fluctuations—from Rs 1600 in 2008 to Rs 600 in 2009. His prophetic anticipation envisioned India's double-digit growth, culminating in a surge of Titan's stock margins from 10% in FY20 to 12% in FY22, validating his steadfast conviction.
1.2 THE STORY OF CRISIL
Inauguration and Ascendance: The CRISIL Saga
The embryonic stages of Credit Rating Information Services of India Limited, colloquially recognized as CRISIL, ushered in a transformative era as India's pioneering credit rating agency. Functioning as the vanguard of credit rating services, CRISIL not only proffered risk management systems and valuation frameworks but also provided astute advisory services. Its standing as India's preeminent rating company was underscored by a formidable market capitalization of 23,000 crores or $2.9 billion as of March 2022, rendering it a pivotal pillar in the investment portfolio of the esteemed Rakesh Jhunjhunwala. With a global footprint extending across eleven nations, including the United States, Australia, the United Kingdom, and Singapore, CRISIL's influence resonates globally. Nurtured under the auspices of Standard and Poor's Global (S&P Global Inc), the world's premier provider of credit ratings, benchmarks, and analytics in the global and commodity market, CRISIL's affiliations traverse diverse domains. Catering to a clientele ranging from small and micro-enterprises (MSMEs) to large corporations, investors, and top-tier global financial institutions, CRISIL's expansive reach extends to collaboration with policymakers and governments.
Genesis and Initial Challenges
The impetus for CRISIL's inception in the 1980s and 1990s emanated from the burgeoning need within the industry to catalyze the development of the bond market in India. Spearheaded by Narayana Vaghul and Pradip Shah, visionaries from ICICI Bank and HDFC Bank, respectively, CRISIL emerged as an institution pivotal to an entire industry revolving around credit ratings. However, the avant-garde concept of ratings encountered a receptive business environment. IPCL (Indian Petrochemical Corporation Limited) emerged as CRISIL's inaugural client, marking the commencement of its journey.
The Formative Growth Phases
The period from 1990 to 2000 witnessed a transformative trajectory for CRISIL. Technical assistance provided by CRISIL facilitated the establishment of Malaysia Berhad, a rating agency, and Maalot, an Israeli rating company, in 1992. CRISIL's Initial Public Offer (IPO) materialized in 1993, signaling its foray into the stock market business, complemented by the development and launch of the CRISIL500 Equity Index in 1995. A strategic alliance with Standard and Poor's (S&P) Ratings Group further augmented CRISIL's global standing, while the formation of India Index Services Limited (IISL) in 1996 marked its entry into advisory services. By 1999, CRISIL's credit ratings attained industry-standard status, with its Risk Assessment Model (RAM) becoming a banking system benchmark. The leadership transition with R. Ravimohan's elevation in 1994 marked an era of diversification, transforming CRISIL into a comprehensive ratings, research, and analytics company.
Global Expansion and Strategic Acquisitions
The subsequent growth phase, spanning 2000 to 2010, witnessed CRISIL orchestrating four strategic acquisitions that reshaped its business landscape. An acquisition in 2000 saw CRISIL absorbing INFAC, facilitating industry research and outlook. A London-based acquisition in 2003, EconoMatters Ltd, was divested by 2010 due to incongruities between management teams. CRISIL's second overseas acquisition in 2005, Irevna, propelled its foray into the global market, fostering a broader perspective. The 2010 acquisition of Pipal Research, a Chicago-based company, bolstered CRISIL's foothold in corporate business and investment research services, culminating in an unparalleled portfolio in the analytical offshoring space.
Rakesh Jhunjhunwala's Strategic Involvement
Rakesh Jhunjhunwala's discerning eye turned toward CRISIL in 2003 when he initiated the purchase of shares. With an initial acquisition of 10,000 shares at Rs. 150, Jhunjhunwala substantially increased his holding to 5.5 million shares by September 2006. The late Mr. Rakesh and Mrs. Rekha Jhunjhunwala currently command a 5.47% stake in CRISIL, valued at approximately Rs. 1200 crore, a testament to the enduring confidence in CRISIL's trajectory and enduring financial prowess.
SOURCE: THE BIG BULL OF DALAL STREET WRITTEN BY NEIL BORATE, APARAJITA SHARMA AND ADITYA KONDAWAR
IMAGE CREDIT: ADOBE STOCK IMAGES
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