What do Azim Premji, Gautam Adani, Rahul Yadav, Kailash Katkar, Sachin Tendulkar and Radhakishan Damani have in common? One, they are all college dropouts and second is that with determination, dedication and focus towards one’s life, they proved that education is not the only factor which can help make a bright and successful future.
An Accidental Entry In Stock Market:
Mr. Damani was born in a Marwari Family in Bikaner, Rajasthan in 1954. He was pursuing Bachelor of Commerce program for his graduation from Mumbai University. Though, he dropped out after the first year, and started his entrepreneurial career with a “ball-bearing” business. Sadly, the business had to be shut down due to unfortunate demise of his father. Still in his 20’s, he joined his brother in the stock broking business as an amateur. Being a keen observer, he tried to figure out what’s and how’s of the functioning of the markets. He swiftly observed and made his first stock market investment at 32. (It’s never too late! :p)
Trading Story:
He grew in confidence and started observing Manu Manek, famously known as Cobra, as he was one of the most feared market operators at that time, ruling the Dalal Street. During the late 1980’s and 1990’s, he majorly invested in multinational companies and with Manek’s strategies, he gained a real foothold in the stock market when he overpowered Harshad Mehta.
The Rivalry: Harshad Mehta and Radhakishan Damani
Mr. Damani along with a chartist named Raju and another young rookie investor formed a group who were locally famous as the “Triple R’s”. According to them, Harshad Mehta was manipulating stocks like ACC and Apollo Tyres since the financials and fundamentals did not justify the valuations. So, when Harshad Mehta was bullish on certain stocks, Mr. Damani along with his other two R’s decided to short these stocks without knowing the source of Harshad Mehta’s funding, leading to terrible losses, thereby forcing Mr. Damani to exit his positions. Later, as the scam was exposed and the big bull was caught, Mr. Damani earned huge profits from the rest of his trades. Till date Mr. Damani says “If Harshad would have kept his position open for seven more days then there was a possibility I would have turned bankrupt.” Later, Mr. Damani also helped the small time innocent traders who were stuck in stocks like Videocon and BPL due to Harshad Mehta, by taking over their positions.
In 2000-2001 Mr. Damani again did short sold stocks against Ketan Parikh’s investment and earned huge profits from it.
Investment Philosphy:
Mr. Damani cleaned up after the scam thereby turning himself into a long term investor. He learnt concepts of value investing from his guru, Mr. Chandrakant Sampat, a legendary value investor himself. According to him, Mr. Damani had both, the patience to earn returns from long term investment as well as the confidence to pick up some short term trades and bet on them. Following his path, Mr. Damani invested in companies like Gillette, HDFC, VST Industries, ITC, CRISIL, 3M India, Blue Dart, India Cements, Gati, TCI etc.
In fact, people questioned his decision of acquiring stake in HDFC Bank when the MCAP was ~INR 400 Crs. since it was the reign of big PSU Banks like SBI. Mr. Damani would calmly responded “Dharavi Dharavi hota hai aur Pedder Road Pedder Road…aage ja ke HDFC ka bhaav dekh lena”. Rest is history. HDFC Bank’s MCAP is ~INR 5,74,600 Crs. as on 25th September’20.
He is also known to own shares of MNC companies such as Nestle, Colgate and HUL. Not an avid reader by choice, he usually does his own research with the help of some traditional methods – talking to a lot of people about a business’s perception and asking them “Market kya lag raha hai?” and treating price as the ultimate thing, in other words “Price is God” or rather “Bhav Bhagwan Che”.
He acquired 15% stake in VST Industries back in year 2000 at the price of INR 80 apiece which is now trading at INR 3470.
DMART, The Revolution:
The story began when the curiosity and interest of Mr. Damani regarding consumer business made him buy the franchisee of Apna Bazar, a co-operative store chain in Navi Mumbai. The knowledge and understanding he obtained from managing Apna Bazar made him more bullish towards retail business and Voila! The birth of DMart. Incorporated in 2001-02, it is currently one of the pioneering retails chains with majority stake owned by Mr. Damani and his family. When real estate rates were down after the “dot-com bubble”, Mr. Damani saw a long term opportunity and hence bought properties outside Thane and Navi Mumbai with the view that once the city grow, so will the business and this action on gut helped DMart grow from few properties in Navi Mumbai in 2000 to over 200 stores throughout India by 2020. The moat of this business model is that most of the stores are owned and in independent locations rather than in malls thereby saving a fortune in rental expenses, which indirectly benefited the customers, in the form of discounts and offers.
Avenue Supermarts Limited, doing business as DMart was listed in 2017. The listing received a stellar response and was listed with a premium of 114% on the issue price of INR 299. This helped Mr. Damani and his family enter the list of top 20 Indian Billionaires. Since then the stock has been giving remarkable returns and is priced at INR 2050 on NSE as of 22nd September 2020. Company earns around 52% revenue from food category followed by 20% from Non-Food Category and 27% from General Merchandise and Apparel.
According to a Business Outlook article, over FY15-19, DMart’s sales and profit have grown at a CAGR of 23.46% and 33.64% respectively. Its average sales/square feet of 32,719 is better than its domestic counterparts’ — Big Bazaar’s (14,514) and Reliance Retail’s (grocery sales of 25,751). Despite the massive discounts offered, its margins are higher than that of global players. The company’s EBITDA margins at 9% is better than Walmart’s (5.6%) and Tesco’s (2.3%). It is also better in comparison to domestic competitors, Spencer’s (0.08%) and Future Retail (4.5%).
His Current Portfolio:
Mr. Damani publicly holds 11 stocks worth over INR 72,465.1 Crs as per Trendlyne data. His portfolio includes the following:
Avenue Supermarts – 51.48%, India Cements – 12.14%, VST Industries – 4.97%, Food and Inns Ltd – 4.72%, Simplex Infrastructures- 2.28%, Mangalam Organics Ltd – 2.17%, Spencer’s Retail Ltd – 2.09%, BF Utilities Ltd – 1.3%, Prozone Intu Properties – 1.26%, Kaya Ltd – 1.11%, Astra Microwave Products ltd -1.03%, Delta Corp – Below 1%.
According to economic times, Mr. Damani also holds 1.58% stake in NSE, the country’s biggest bourse as of September 2020. Mr. Damani also owns a 156-room Radisson Blue Resort in Alibag.
Other Interesting Insights:
Mr. Damani is believed to be extremely introvert and humble personage and fits perfect for the quote, “Actions speak louder than words”. India’s great investor, the big bull, Mr. Rakesh Jhunjhunwala calls Mr. Damani his mentor.
The rise of Mr. Damani, an entrepreneur and an investor, also known for his courage, to beat Mr. Harshad Mehta in his own ground.
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