Rakesh Jhunjhunwala bullish on commodity cycle and PSU banks, especially SBI

Rakesh Jhunjhunwala, one of India’s most well-known share market investors, said he is fully invested in the markets. “I am very bullish ... am fully invested,” Jhunjhunwala, a billionaire who runs his own asset management firm named Rare Enterprises, said in an exclusive interview to Moneycontrol.

Jhunjhunwala, often dubbed as India’s Warren Buffett, added that he is betting big on the commodity cycle and is bullish on PSU banks. He said his top picks includes India’s largest lender, State Bank Of India. The following are highlights from an interview during which Jhunjhunwala, also called Big Bull, weighed in on the equities market, his ambitions as a private equity investor, how he picks companies for investments and more.

Bullish On PSU Banks

Rakesh Jhunjhunwala has invested in PSU Banks - SBI and Canara Bank. Betting on the credit growth opportunity he said, “I think traditionally credit growth to GDP in India is 1.25-1.50. Credit growth, which is 6-7%, will go to 15% according to me.”

Highlighting the advantages of the PSU banks he said adding to credit growth prospects, these banks are fully provided in their provisioning and they have deposit gathering ability.

Catch the full interview with Rakesh Jhunjhunwala here

SBI is the Top Pick

Speaking particularly on SBI, he said, “Very well run, they have Yono. If someone wants to borrow Rs 5,000 crore, whom is he going to go to? Doing very well in retail space, their subsidiaries are doing well. Nobody can match their distribution for retail, mutual fund.”

Strong Momentum In Commodities

Rakesh Jhunjhunwala believes that the potential of the commodity stocks is yet to be realised on their stock performance. He said, “in commodities, have invested in Tata Steel & JSPL. This commodities cycle is here and will last for minimum 5 years. In comparison to the cash flows, the valuations are still absent”.

Value Unlocking In Private Equity

Over the years, Rakesh Jhunjhunwala has been actively re-deploying the profits from equity investments into the private equity space. There have been hits and misses he agrees but is confident that some portfolio companies will give “multi-returns”.

Many of the PE investments made by Rare Enterprises have now reached maturity and are ripe to list. An investment made 2 years ago in a consortium with WestBridge, Star Health, is close to filing for an IPO, reports suggest. “Four companies from PE portfolio should list in 12-18 months, he said.

Private Equity Deal Thrust

Active investments in high growth sectors with high entry barriers continues for Rakesh Jhunjhunwala. In the latest, he formed a consortium with Renuka Ramnath’s Multiples to buy Zydus Animal Health (ZAHL) for close to Rs 3,000 crores. “Animal husbandry and poultry can be a big source of income for the farmers, with the govt promoting this space, the opportunity is too huge,” he said. Renuka Ramnath, Founder, MD & CEO at Multiples points out that Innovation engine in ZAHL is very strong with 10 first-to-market products, 10 new products are in the pipeline to expand the product suite.

Rakesh Jhunjhunwala is looking at 2 more PE deals in the next 6 months in the space of education & healthcare. His ability to hold on to his companies with no strict timelines for exit like other private equity funds gives him an edge over the others.

The acumen to value buy in stock markets has flushed this ace investor with cash to fund companies in the private space and ride the growth story. His forte to generate profits from stocks is going to continue and so will PE investments backed by that free cash flow as he said, “I have already invested more than I could invest in last 10 months. This phase has been financially very very lucky for me.”