Harsh Mariwala, not a run-of-the-mill investor
First, we have to note that Harsh Mariwala is not an ordinary investor looking to park his surplus money into stocks.
Instead, he is a visionary industrialist who is credited with having set up the powerhouse companies called Marico Ltd and Marico Kaya Ltd.
Both companies are mega multi-baggers in their own right and have created humungous wealth for shareholders thanks to the dynamic leadership of Harsh Mariwala.
Harsh Mariwala has amassed a Net Worth of $3.2B equal to Rs. 20,800 crore
Harsh Mariwala has single-handed amassed a massive fortune of USD 3.2 Billion equal to INR 20,800 crore for himself.
It is obvious that the sayings and doings of such a luminary cannot be treated lightly but have to be treated with the utmost respect.
In fact, it is believed that Billionaires are blessed with a sixth sense which enables them to home in on winning stocks and that following the moves of Billionaires and cloning their stock picks can be a highly profitable activity for novice investors like you and me.
Latest stock pick: L&T Finance Holdings
Few are aware that Harsh Mariwala is an ace investor in his own right. He has his own “family office” which invests his surplus funds in stocks. Nearly 75-80% Of the family office money is invested in equities. The rest is invested in start-ups.
He is a believer in the merits of a concentrated portfolio and has about 8 to 10 top-quality stocks in his portfolio.
Harsh Mariwala has announced that his latest stock pick is L&T Finance Holdings. He disclosed that he has bought a treasure trove of 4 lakh shares of the company at an average price of Rs 80 per share.
Why L&T Finance?
At this stage, we have to compliment Prashant Nair and Ekta Batra, two of the finest investigative journalists with CNBC TV18, for knowing what questions to ask and how to ask them.
The duo cornered Harsh Mariwala and point-blank asked him why he had invested a fortune in L&T Finance when so many other NBFC stocks are available.
Mariwala, to his credit, did not flinch. He gave a straight answer:
“The Company is undergoing a big shift in terms of business model. I believe it’s on the right track and if they will be able to execute it well it will do further better,” Mariwala said using simple but effective logic.
— CNBC-TV18 (@CNBCTV18Live) December 30, 2016
He warmed up further on being prodded by Prashant and Ekta.
“There has been transformation in terms of business model, which areas to pursue, which areas to drop …. there has been a lot of internal change in terms of management team …. personally I have confidence in the ability of the management,” Mariwala said.
The Billionaire also issued subtle advice to us to be patient and learn to hold stocks instead of trading in them:
“I don’t trade in shares. I buy and hold on. As long as I am confident that the company will do well, I will keep on holding on the company,” he said.
— CNBC-TV18 (@CNBCTV18Live) December 30, 2016
L&T Finance – in a dominant position
Rajesh Mascarenhas & Kala Vijayaraghavan of ET also conducted independent investigation into the matter and also spoke to leading experts to deduce the rationale behind Mariwala’s move.
Siddhartha Khemka of Centrum Broking, one of the experts questioned by the duo, indicated that he is very bullish about L&T Finance. He said:
“L&T Finance loan book (is set) to grow over 20% CAGR in the next few years driven by the focused business, gradual improvement in asset quality and the likely benefit from government’s focus on power and infrastructure sectors along with a robust growth in housing and microfinance segments”.
A similar opinion was expressed by Atul Karwa of HDFC Securities. He said:
“L&T Finance has strong capabilities to raise resources and is now focused on segments which are likely to see strong growth in the near future”.
Karwa advised investors to buy L&T Finance for sequential targets of Rs 120 (2.7x FY18E ABV) and Rs 134 (3x FY18E ABV) in 2-3 quarters.
The duo of Mascarenhas & Vijayaraghavan also pointed out that the first sign that better times are dawning for L&T Finance is evident from the latest September 2017 quarterly numbers. The RoE for the quarter is up 11.7% against 9.8% in the corresponding period in the previous year. In the September quarter, overall loans continued to grow at a steady 18% YoY to Rs 60,898 crore, while net NPA declined 6bps to 3.07%.
They also emphasized that L&T Finance has built a strong position in the Indian financial services industry due to loan book size exceeding Rs 57,000 crore and pan-India reach with 700-plus points of presence across 24 states.
Solemn pledge by A. M. Naik, the legendary leader of L&T, to improve the fortunes of L&T Finance
I have earlier drawn attention to the fact that A. M. Naik, the legendary chief of L&T, has issued the solemn assurance that remedial steps will be taken to improve the RoE of L&T Finance and set it on a high growth trajectory.
Naik’s words are worth recalling:
“We made some changes in L&T Finance and it is now on track to growing return on equity. This will drive share prices more and it will cross Rs 100 in three-four months and Rs 150 by December next year. Anything that grows well, can manage well, can compete well and can have interlinking businesses with the rest of L&T, is core.”
He repeated this assurance in another interview:
“In the last one year, it has done much better. The stock has performed very well. It has doubled in one year. I have no doubt in my mind that next year, with the kind of focus that they have on the Return on equity and a number of other initiatives which have been taken, reconstitution of the management, new CEO has come whose focus is on return on equity, I have no doubt that the stock will move up considerably in the coming twelve months”.
It should be noted that in a dramatic break from tradition, AM Naik even indicated what the price targets of L&T Finance are likely to be – Rs 100 in three-four months and Rs 150 by December 2017.
What is creditable is that the stock did perk up and achieved the first target of Rs. 100:
They say the chairman is the best analyst of a stock and thats true for L&T FINANCE HOLDINGS LTD. atleast…TP came early 😉
— Nigel D'Souza (@Nigel__DSouza) October 14, 2016
Restructuring game plan explained in detail
Dinanath Dubhashi, the MD of L&T Finance, has left nothing to imagination. He has given an elaborate explanation of what the restructuring entails, how much time it will take and what benefits will accrue from it. He promised that “excellent growth & profitability” will be the result of the restructuring strategy.
Favourite stock of Daljeet Kohli, Sandip Sabharwal and Ajay Jaiswal
I have earlier diligently drawn attention to the research reports issued by leading experts like Daljeet Kohli, Sandip Sabharwal and Ajay Jaiswal. All experts are unanimous in their opinion that L&T Finance is an ideal investment given its blue-chip parentage, reasonable valuations and impending restructuring.
The veracity of these opinions is now proved by the actions of Billionaire Harsh Mariwala!