A Brief Study on Raamdeo Agarwal Success Story: If you are involved in the Indian stock market for quite some time, you might already have heard the name of “Raamdeo Agarwal” somewhere on financial websites or the News Channels. Mr. Raamdeo Agarwal is one of the most renowned names in the Investing world. His influence and ‘so-called genius’ was such that he is also known as ‘Warren Buffet from India’.
Raamdeo Agarwal is also popularly known for co-founding Motilal Oswal Financial Services and his family today owns about 36% stake in the company. As of 2018, Mr. Raamdeo Agarwal had a net worth of $1 billion according to Forbes. Further, he is regularly in the spotlight where he has been even interviewed by Saif Ali Khan.
Today, we have a look at Ramdeo Agarwal’s journey in his personal life and in the investment world in search of the spark that has catapulted him to this status. We’ll particularly focus on Raamdeo Agarwal Success Story in the Indian stock market industry.
Raamdeo Agarwal’s Early life
Raamdeo Agarwal hailed from Raipur, Chhattisgarh. Being the son of a farmer he talks shares that the only investment strategy his father knew was saving and investing in his kids. Raamdeo Agarwal moved to Mumbai to complete his higher studies. He pursued Chartered Accountancy and completed the course in five years.
It was in Mumbai where he met his soon to closest associate and business partner Motilal Oswal. Their paths crossed as they lived in the same hostel. Oswal described him as a very bookish person who was very interested in reading company reports and Balance Sheets.
(Left to Right: Raamdeo Agrawal and Motilal Oswal)
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Life After entering the Stock Market
Raamdeo Agarwal and Oswal had one common interest, it was the Stock Market. In 1987 they decided to become sub-brokers in the BSE. He managed to become a stockbroker by 1990 and also began investing for himself in the stock market. By doing so he was able to develop a portfolio of over Rs 10 lac.
Over the next few years, we could say that he was lucky to have stayed invested in the stock market when the Harshad Mehta bull run arrived in 1992. His investment of 10 lac had now become 30 crores. Once the bull run was over reports of the Harshad Mehta scam broke out. This saw his investment value drop from 30 crores to 10 crores.
(Left to Right: Warren Buffet and Raamdeo Agrawal)
This was the period where he took a step back to rethink his approach to the markets. In 1994, he went to the US to attend the shareholders meeting of Berkshire Hathway and meet his idol Warren Buffet. After his meeting with Warren Buffet, the first thing he focussed on was getting the most by reading all the letters written by Warren Buffet to Berkshire Hathaway.
It was after this that he changed his investment strategy. Till then his 10 crore portfolio included 225 stocks. He sold most of them and invested in only 15 stocks. This was because he realized that it was the quality and not the quantity that mattered. H later came to call this the Focus approach. His portfolio increased its value to 100 crores by the year 2000. In 2018 Forbes listed him as a billionaire.
Some of notable investments of Raamdeo Agarwal
Here are a few of the famous and most profitable investments made by Mr. Raamdeo Agarwal in the early phase of his career:
- Hero Honda – He had purchased Hero Honda stock at Rs. 30 in 1996 and sold it Rs. 2600 in the year 2016. In the 20 year period, he also received a dividend of around Rs 600 per share.
- Infosys – He purchased shares of Infosys in mid-90s and sold them to get a return of over 12 times. In this holding period, he also received consistent bonuses and dividends from this stock.
- Eicher Motors – He purchased Eicher at Rs. 900. The investment touched over Rs. 32,000 in 2017.
If we consider an investment of one lac in each of these stocks, the three lac portfolio would increase wealth to 1.5 crores i.e over 50 times.
Raamdeo Agarwal Success Story: Secret Sauce
The investment strategies followed by Raamdeo Agarwal have been suited as per his experience. They are as follows
— QGLP (Quality, Growth, Longevity & Price)
QGLP stands for the four factors considered while purchasing a stock.
Raamdeo Agarwal realized the importance of this factor after investing in Financial Technologies. This is an example he shares as one of his poor choices. He made a loss while investing in Financial Technologies (India) Ltd. This made him realize the importance of the quality of management in a company. He purchased the shares of at Rs. 1150 and later was forced to sell at Rs. 150.
Raamdeo ensured that after this he always paid extra attention to the management. He also considers this as a deciding factor as in comparison all the other data is accessible or computable by the regular public. But it is the management that is left in the dark. He ensures that his investments have good, honest, and transparent management. The management should also take care of the shareholders and give timely dividends and at the same time also have capita for growth.
Raamdeo considers a growth stock as one that is of a big company that is not yet popular. By investing in these companies the returns will be high but secured at a low cost. Raamdeo says that investing is nothing but figuring out the present value of all the future earnings and deciding accordingly.
This factor encourages investors to invest in companies that have been around for a long time. This not only gives the investments some stability but also gives the investors enough data to enable them to take decisions.
According to this at the time you buy the stock, its price must be lower than its valuation.
— Raamdeo Agarwal’s Strategy with regards to portfolio
According to Raamdeo an investor for his personal purposes should have invested in a maximum of 15 stocks. According to him, 15 stocks is too much. He instead would suggest 4-5 stocks. Investing in multiple stocks gives investors the benefits of diversification.
But 90-92% of the benefits are claimed by the time the portfolio reached 15. From here on the benefits are slim. An investor wishing to tap into the final 10% would have to invest in numerous stocks. It would reach a point where it also impairs the quality judgment. This because it would not even enable him to go deep enough into finding about the stock.
— Buy and Sell Strategy
Raamdeo put forward the theory of ‘Buy Right, Sit Tight’. According to this, one should research in-depth while purchasing a stock. He should be confident enough to invest at least 10% of his portfolio. He also adds that if things go really awry the price of a quality stock will not just suddenly drop. An investor who has researched enough will see it coming and the gradual decline will give ample time for the investor to exit.
— Disciplined Approach to portfolio
The discipline Raamdeo follows with regards to his portfolio is remarkable. When he noticed that the shares of Berkshire Hathway no longer suit his portfolio filters he decided to sell them. This was despite his idol Warren Buffet remaining invested.
The success story of Raamdeo Agrawal is one of hope to all investors. Throughout his journey, we never found the special greatness spark that we thought is made available to only a selected few. His story shows that at times luck may be in our favor but not to be dependant on it.
Most importantly it also shows that we are to have a disciplined approach to our investments and also to learn from our mistakes. It shows how market tests patience and reward conviction.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.