To clear your doubts . I will give an example of the same investor’s( Warburg Pincus ) investment in Laurus Labs . They bought a 32 % stake in 2014 at a 1700 cr valuation. They sold some stake when Laurus went public in 2016 at 5000 cr valuation (Stock price of around 100 )They sold the remaining stake ( around 20%) in May and June of 2020 at 5000 cr valuation( Again stock price around 100) . By the end of September 2020 Laurus was trading at 250 per share. By July 2021 Laurus was trading at 650 per share . They made 3 times their money in 6 years , but missed 6.5 times rise in the next one year . Once their selling was done , there was no stopping the rise. Remember they were on the board of Laurus too.
Fun Fact : Warburg Pincus invested in QIP of Idfc first bank in May June of 2020 at around 20 Rs per share . We cannot say for certain , but some money from Laurus sale might have been used for Idfc first QIP. Even after waiting for 4 years , they could not get the 6.5 times return in Idfc first that Laurus got in next one year .
Conclusion:
- Even the biggest investor , with the access to CEO and the board information can make horrible calls.
- If you are right in the fundamental analysis of the company , the exit of the biggies is often the best time to load up .
It’s not a recommendation to buy Idfc first , but according to me it is definitely a good time to look at it more closely .
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