Ajay Piramal and Art & science of buying & selling businesses

There are multiple ways to invest in the equity market. Value Investing like Buffett, Growth investing like multiple investors picking small cap stocks and waiting for them to become large cap stocks. Many outsource it to fund managers by buying mutual fund units. Some just buy index funds. Few become co-investors with PE firms. Few take higher risks by investing into start-ups.

 

There is another way of investing which does not get discussed in the mainstream media. It is just following the entrepreneur. Had you believed in Narayana Murthy and Azim Premji thirty years ago and invested your money in the businesses they managed, what would be the returns on your investment? How about blindly following Elon Musk and put your money in Tesla early in the game? Just think about it. You would have earned handsome money and beaten the broader market.

 

I follow Ajay Piramal for similar reasons. I have invested in the businesses he manages because of him. His capital allocation skills are excellent. But he is well known for acquiring businesses, scaling them up and exiting at a premium. He did that with a pharma business. Now he is on his way to scaling his NBFC business. The earlier years of getting into lending business were more of learning years. Just providing wholesale loans to real estate developers was not profitable. In fact, he had to incur losses when the Covid had hit real estate industry hard. He had to de risk his business. Buying the bankrupt DHFL helped his firm to diversify into granular, low ticket retail loans. And he has built a team of professionals to manage the growth. Going by their loan book size, they are way bigger than many regional banks. Their eyes are set on getting a banking license, though it may take several years before they get one.

 

Knowing the person at the helm gives me confidence to invest in his business. It is my conviction, and I could go wrong if Ajay Piramal does not see success in the coming years. This is not an investment advice but sharing my conviction. Every business will have challenges but if you believe in the ability of the person at the top to overcome and make money, it is better I handover my money to him. I have just done that.