Indian investors have a problem identical to that of Ramesh Sippy. Sippy made Sholay, a movie that released on August 15, 1975. I saw it on August 16th, with tickets from the black market, in my neighborhood, Anil Talkies. I came away, all of 11, feeling that I had seen a freak movie, the likes of which would probably never get repeated.
That thought was prescient. Sippy never made another Sholay. Not that he didn't try. Not that he suddenly became a lesser filmmaker. Not that audience tastes changed. Actually, not that anything changed at all. Sholay became Sholay simply because, as lightning, it never struck twice. All the rest were Pakistani drones, a bit of sound and light, but no real impact.
Indian investors have a Sholay problem. Rakesh has become the sole yardstick, the lone arbiter of whether you are a successful investor or just a DeLorean trying to become a Ferrari Purosangue.
And this kind of thinking is dispiriting. Depressing. And dangerous. Because it makes a mortal with degradable body and brain tissue, into a Haile Selassie-esque figure, where apotheosis replaces steely rationality.
Investors of today, therefore, need to understand what really happened in those Arcadian, post-2004, days of Rakesh's. They need to understand the rising tide that led to his fortune. And they need to understand that without such tides & floods, all of which are largely God-made, the voyage of life will be bound and gagged in average-ness or slightly above.
Rakesh entered the market in the mid-80s. India's GDP was around $150 billion. Harshad was right when he said that India was an undervalued small-cap. Rakesh reworded those lines, a decade later, calling India a " runner without shoes". Much like Amitabh photocopied Dilip Kumar's hissed dialogue delivery.
There are also additional factors in play: the 80s and the 90s, and also thereafter, were all about globalization. Nobody who is not on drugs can believe that globalization will live on, from the era we are in right now. It is going exactly in the opposite direction. That means a far hazier future than what Rakesh encountered in his time.
But let's for a moment dwell on his journey: after the Harshad Mehta episode, he had a troublesome patch in the 90s when the markets were working through the hallucinations of the 92 bull market. Returning to sanity is never a good thing for stock market investors. And it is precisely because of that Zeitgeist that Rakesh pretty much missed the tech boom of the late '90s. He had positioned himself as a value investor, and in the tech boom, value was defined as something trading at 20x. 20x Book Value, that is. He sat that one out.
That bull was young and furious. Its heart gave way in 2000, and from there it gradually collapsed into a sorry pile of skin and bones by 2003.
In the years leading up to the bottom of the bear Market, Rakesh would often argue with me, "Indian IT is just a minuscule part of the world IT market. Why can it not grow significantly from hereon?". My view was steadfast: "The next bull market is going to be a completely new bunch of companies and not the tech names".
And that is when Titan had a rebirth. I knew Titan literally from its first birth, having been involved with Timex Watches ' India project set up ( they had tied up with Titan) as my first project finance transaction, back in the 80s, at Citibank.
Rakesh bought, as per Neil Borate's book on RJ, Titan in the early 90s.
Despite a splashy campaign, Titan watches didn't exactly set the Yamuna on fire. The 90s were a lost decade for Titan. This is where things become a tad theatrical.
Despondent after having missed the dotcom boom, Rakesh went in early into the market early as a Bull. Probably around 2002, 2 years into a ferocious bear market. But the market continued to slide, and his despondency grew.
In 2003, however, things changed for Titan. Tanishq, its gold jewelry business, started to get a bit kinetic. The reasons were entirely unforeseeable: a massive crash in the US dollar sparked off a massive bull run in long-dormant commodities. Gold snapped out of a multi-decade bear market and quadrupled from around $200 to $800 in 3-4 years. Gold demand exploded. Titan's inventory of Gold goosed up its earnings beyond volume sales.
All in all, Titan found itself in the Perfect Good Storm. And Rakesh went right into the equable, idyllic eye of this storm.
Titan looked, at that point in 2004, a too good to be true stock bet. Like a Sachin at age 16. Except that, Titan was more Chetan Chauhan x Navjot Sidhhu- a second coming for a company that had " no hoper" written all over it.
In hindsight, such perfection is an impossibility: a credible corporate group like the Tatas, engaged in a dodgy business like Gold retail, the fall in the US dollar, gold ending a 20 year bear market, gold jewelry getting into the organised retail space, and - not to be under-estimated - a stock that was reasonably liquid to be buyable in size.
I forget the other, perhaps more crucial tailwind - a rare ( no pun on Rakesh's investment company name) Emerging Markets bull market started in 2004, and India was right in the middle of it, having been granted entry into something called BRIC.
All in all, Titan was, by chance or by design, manna from the heavens. Rakesh doubled up on it. And more. A stock he'd owned for 10 years prior suddenly came to life, like Arbaaz Khan's ultra-mediocre life suddenly changing after he made Dabang.
Sometime in 2007-8, while having a drink with Rakesh, he said to me: " I am paying Rs 8-9 crore in interest cost per month". Now think about that. Assuming that's ~12-15% cost, the loan-leverage amount on his positions would have to be around 700 crore-1,000 crore.
Now, let's pause and whisk the above details nicely. A great management, a liquid stock, a perfect commodity, turning business dynamics, macros that simply couldn't be better, a weak dollar, an emerging markets bull run, a government that pushed massive buying power in the hands of the poor through MNREGA, India's GDP growth in those years hitting the revered 10% mark.
And then, the belief - some might call it recklessness - to buy this with a truckload of leverage.
How likely are you, young, small, new investor, likely to find all of that today?
Rakesh's Titan success is the Indian stock market's Sholay. It is probably unlikely to be repeated ever. It was the result of a confluence of events that are beyond what anybody can visualize, structure, or engineer.
Sholay, in today's rupees, grossed Rs 3,500 cr. The best of Khan starrers struggle to reach Rs 1,000 crore.
And that is why the Spectre of Rakesh hovers over every investor in India: can you get that Titan in your life?
And even if you did, would you have the courage, perhaps even foolhardiness, to pile on a ton of leverage to buy it? Should you?
Rakesh subsumed himself into Titan (and a couple of others). But that wasn't the first time he loved that passionately. I remember a similar love for Bata, which he would evangelize through the 90s, at every party to anyone in earshot.
The Bata story wore out quicker than its hawai chappals: it was in the mid-50s in 1997. In 2003, it was Rs 30.
So let's face it: the chances of your getting a Titan, and thereby, getting to a Rs 35,000 cr net worth, are less than that of new Bombay flyovers not developing craters within a fortnight of their inauguration.
India was a 300 billion dollar economy then. At $4 trillion, India won't ever grow 10% again. The entire Emerging Markets pack probably won't ever have a unified bull market like 04-07 again. And you will never find a near monopoly like Titan in a large addressable market like gold jewelry. Run by the most ethical group in a country where ethical groups are rarer than a sensible statement from a recent US President.
Titan was the reward God gave Rakesh for being a good human being. But even God needs macro & micro tailwinds to deliver his largesse. Titan went from a Rs 1,500 cr cap in '04 to Rs 3 lakh crore. 26% CAGR.
That's Virat between 2014-2019. Average of 72. Elysian in every way.
The Ramesh Sippy in Rakesh tried a Sholay repeat in Aptech and Akasa. Not easy. Not easy at all.
It's time to exorcise the Ghost of Rakesh's Titan. Does it even matter that you won't get to Rs 35,000 crore?
Instead of chasing a Sholay, would you be unhappy with your Rs 500 crore Sayaara? If you bought two lottery tickets, one of Rs 100 cr, and one of Rs 1 crore, and you won the Rs. 1 cr. How would you feel? How should you feel? A winner? Or a loser?
The Titan bet was a Bradman 99.96 average. Nobody is getting there ever. Forget chasing that chimera.
Buffett is great, but what was greater was the post-1981 bull market. As I always say, there are no great investors. There are only great bull markets.
But don't forget, Buffett's float. That was the loose but infinitely equivalent of leverage that Rakesh used liberally in the halcyon days of the UPA-era bull market.
If you were to put investing genius into a mathematical equation, it would look like this:
Investing Genius
IG = (wBxB + wL x L + wS x S) x F
Definitions:
IG = Investing Genius (perceived outcome)
wB= weight of Bull Market Tailwind (e.g., 0.5–0.7 in strong markets)
wL= weight of Luck (0.2–0.4)
wS= weight of Skill (0.1–0.2)
B = market beta effect (macro tailwinds)
L = luck factor
S = skill factor
F = free float/leverage multiplier
Plug in your own estimates in this, but be liberal with the B, L, and F factors in estimating your projected net worth. Don't be arrogant about the S factor.
I often remember what Juhi Chawla said once in an interview, long after retiring. When asked what her biggest regret was, she replied: "I was forever No. 2 to Madhuri. And I hated it. I wanted to be No. 1. But never could be. So the best years of my life, when I should have been at my happiest because I was No. 2 in the largest movie industry in the world, I was at my saddest. Instead of enjoying and being at peace with the elusive No. 2 status, my craving for the No. 1 spot ruined what should have been the most rewarding passage of life".
Shankar Sharma is an ace investor and founder of AI firm Gquant Investech. He writes as Le Grand Fromage.
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