Mohnish Pabrai’s talks discussed at Dalal Street’s Chai ki Tapris
“Mohnishbhai ne bola hai ke Rain Industries mein 400% gain hai,” Jigneshbhai said, as he sauntered to meet his fellow punters at Shyam’s Tea Stall, the nerve center of Dalal Street.
Jigneshbhai had to contort his face while talking to prevent the gutka juice dribbling from his mouth.
Mukeshbhai stared at him unblinkingly.
“Logic kya hai?” he asked, with the air of an intellectual, even as he expertly tore open a sachet of Kamala Pasand and tossed its contents into his mouth.
The question stumped Jigneshbhai. It never occurred to him to inquire into the logic for buying a stock.
He spat out the gutka and took a sip of the kadak chai, his brow furrowed with deep thought. He was determined not to let Mukeshbhai get the upper hand.
“Yeh Dolly Khanna ka stock hai,” he blurted out, knowing that the logic is irrefutable.
Now, it was the turn of Mukeshbhai to be on the back foot. He gracefully conceded defeat.
“Phir kya problem hai? Stock daba ke lene padega,” he replied with a toothy smile, even as the other punters gave Jignesh a pat on the back for his brilliant stock picking abilities.
(Punters at Dalal Street debating stocks)
Balancing act between intellectuals and punters
At this stage, we have to compliment Mohnish Pabrai for tailoring his talks such that it is not only the high-brow intellectuals who find merit in it but even the punters at the bottom of the food chain find it worthwhile to listen.
Mohnish cleverly mixes up his talk with references to Charlie Munger and Warren Buffett (which the intellectuals adore) with practical examples of multibagger stocks that he has personally snared (which the novices find irresistible).
Mohnish also smuggles in stock recommendations in a subtle manner in his talks.
We saw a stellar example of this in Mohnish’s talk at the Google HQ. He revealed that he has bought a massive chunk of a specialty chemical company which will prosper from the unending demand for automobile tires. This created great excitement amongst the novices. The stock was later discovered to be Oriental Carbon and Chemicals, a high quality small-cap stock which is destined to be a multibagger.
We will make upto $200 Million gain from Rain Industries
“I put 20 million of Pabrai Funds into the Company (Rain Industries). It is now worth north of 50 million. I think we will probably get 100 million or even 200 million out of it,” Mohnish said (@ 53) in his characteristic drawl.
Mohnish was addressing a room full of bright-eyed students of the UCI Paul Merage School of Business in the University of California.
As expected, the students had done their homework thoroughly. They grilled Mohnish on a number of complex investing theories. Mohnish answered all questions with his typical aplomb.
From our perspective, it is obvious that if Rain Industries surges from 50 million to 100 million, we are talking of a 100% gain. If it surges to 200 million, there will be 4x gains waiting on the table for us to feast on.
Dolly Khanna has bought a truckload of Rain Industries
In an earlier piece, I have drawn attention to the fact that Dolly Khanna has bought a massive chunk of 42,68,092 shares of Rain Industries as of 30th June 2017.
I have also referred to the investors’ presentation which sets out details of the various expansion plans and their stage of completion.
There is also an analysis by Darshan Mehta of Bloomberg (then with ETNow) where the salient features of the Company are explained in a succinct manner.
IDBI Capital has conducted an expert analysis of the stock and recommended a buy.
Blockbuster Q1FY18 / Q2CY17 results
Rain Industries has justified the confidence reposed in it by Mohnish Pabrai and Dolly Khanna by reporting blockbuster Q1FY18 / Q2CY17 results.
The revenue from operations surged to Rs. 2716 crore while the adjusted EBITDA surged to Rs. 468 crore.
The Net Profit After Tax was Rs. 152 crore while the Earnings Per Share stood at Rs. 4.5.
It is commendable that the performance was sustained in spite of depreciation of the USD and Euro against the Indian Rupee.
Rain Industries also has a strong cash balance of Rs. 850 crore to fund Capex projects and meet debt obligations in the near-term.
|Consolidated Financial Performance||in Millions|
|Particulars||Q2 2017||Q1 2017||Q2 2016||CY 2016|
|Other Operating Revenue||95||123||126||567|
|Revenue from Operations||27,166||25,349||25,661||94,945|
|Adjusted EBITDA Margin||17.2%||17.4%||18.5%||17.2%|
|Profit Before Tax and Exceptional Items||2,375||1,717||2,341||5,021|
|Profit Before Tax||2,375||1,047||2,341||4,759|
|Share of Profit of Associates and Minority Interest||(41)||(55)||(29)||(58)|
|Adjusted Net Profit||1,515||1,028||1,267||3,457|
|Adjusted Earnings Per Share ( Rs ) *||4.5||3.1||3.8||10.3|
*Quarterly EPS are not annualized
The Company has also released an updated investors’ presentation which provides the latest information about the ongoing expansion plans.
It is rare to find a stock in which two eminent investors of the caliber of Dolly Khanna and Mohnish Pabrai have confidence.
It is even rarer for investors of the stature of Mohnish Pabrai to advice us that the stock has 2x/ 4x multibagger potential.
Prima facie, it appears that this is a golden opportunity for us. We have to mull over the situation seriously and take the appropriate decision!