Radhakishan Damani (aka RK Damani) is an investing legend because of his unique ability of being able to see the future much before others do. We got a glimpse of his awesome investing ability in January 2014 when he quietly picked up a truckload of GATI & TCI stock. This was at a time when NAMO mania had not yet gripped the nation. Infra stocks were totally out of favour and were available at throwaway prices.
You can see the magic of RK Damani’s timing because today, just 8 months later, GATI is up a mind-blowing 283% while TCI is up 198%. The timing couldn’t have been more perfect.
Radhakishan Damani’s latest stock pick is TV Today Network. Yesterday, his investment arm, Derive Investments, bought 11,80,448 shares at an average rate of about Rs. 200.
Credit for identifying TV Today Network as an investment opportunity has to go to Ramesh Damani. As far back as in April 2005, Ramesh Damani had confidently declared “TV Today will blossom once FDI in broadcasting comes”. At that stage “digitization” was not even in contemplation. However, Ramesh was way ahead of time. TV Today ran into heavy losses and even Rakesh Jhunjhunwala, the Badshah of Dalal Street, who held up to 2.74% of the equity (in December 2005) got fed up and exited.
At this stage, you must note the difference in investing styles of the two Damanis. While Ramesh dived into the stock (since 2005 or probably even earlier) and steadily increased his holding (he held 686024 shares in September 2011 and presently holds 8,19,686 shares), Radhakishan bided his time till he was sure that TV Today had got its act together and the gains were on the table. Radhakishan Damani bought his first lot of 8,96,000 shares of TV Today as late as the September 2013 quarter.
Even after that, Radhakishan Damani has been carefully evaluating TV Today’s performance and pondering over whether it deserved a higher allocation. He waited for two Quarters to go by.
TV Today’s blockbuster Q1FY15 results convinced Radhakishan Damani that the company has come of age and the time is ripe for a deeper dive into the stock. That is how yesterday’s purchase came about. In fact, so great is his confidence now that he has more than doubled his holding in the stock.
RK Damani’s total investment in TV Today is now worth Rs. 44 crore. Ramesh Damani’s holding is worth Rs. 17 crore.
To understand why these investing legends are showing such conviction in TV Today, we have to turn to the brilliant analysis by Rakesh Tarway of Motilal Oswal. In a report issued in Dec 2013 (when TV Today was at Rs. 118), Rakesh Tarway explained that broadcasters like TV Today would reap windfall gains owing to Digitisation. He pointed out that Digitisation would ensure ensure increase in cable capacity, which would lead to reduction in carriage cost paid by broadcasters to erstwhile analog cable operators. This means the power of bargaining would shift from distribution networks to content and broadcasting networks would grow their profit at CAGR of 35-40% during FY13-FY17 just because of increase in subscription revenue. All of this which would flow entirely to bottom line, he added.
Ramesh Damani also conducted an interview in January 2014 where he grilled media experts on the scope for the media industry. The conclusion of that interview was that “ongoing digitization wave is going to be a game-changer for Indian media companies”.
Ramesh Damani reiterated this when he recently recommended TV Today to his fans. “Digitization is happening in India, which is a huge game changer for the entire media industry. It means more subscription revenue, less carriage cost. And content business will also drive its margin”, he said in pithy words.
Now, the all-important question that we have to ask ourselves is what we should do. Should we also dive in or stand on the sidelines? Personally, I think it would be naïve of us to second-guess these legendary investors and miss out on the opportunity. We need to show some faith and dive into the stock by way of a SIP.