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Hello, I welcome you to this very special Diwali event . As usual every year, my guest today is Rakesh Jhunjhunwala, but Rakesh, first of all, I would like to wish you a very Happy Diwali . I hear that this year has been a very important year for you in many ways . You have crossed several important milestones in your investment portfolio .
Most importantly, you have made a big decision to donate a large portion of your wealth , and I commend you from the bottom of my heart for that action . This is a significant action. But from your perspective, how would you rate the year between last Diwali and this Diwali ? Are you happy with how this year turned out , or did you expect more ?
First of all, I would like to wish you, all the viewers , and all Indians a Happy Diwali and a prosperous New Year . I want to clarify that I have not donated anything yet . Currently, I donate 25 crore rupees every year to charity . I have pledged to donate 25% of my portfolio or Rs 5,000 crore, whichever is less, when I turn 60 on July 5, 2020 .
So, this is a promise, and I hope the Lord will give me the strength to fulfill it . As for this year, it has been a good year financially, there is nothing to complain about. Also, personally, I had to take a long bed rest , during which time I reflected on life. And I think I've matured as a person more in the past year than I have in many years .
I think I'm trying to find a new purpose in life. This is more important and meaningful than accumulating wealth , and I have no doubt that you will accumulate more wealth over time, but there are other things that are more important than making money. I hope you agree with this. But, Rakesh, I looked at the statistics from Diwali 2014 to this Diwali.
The market was flat from 2014 to 2015, and between Diwali last year and this Diwali, the market has risen by about 8-9% . These are not surprising returns. Do you think this is because the market has realized that the pace of economic recovery is slower than expected ? What could be the reason for the index's sluggish performance over the past 2 years, by market standards ?
No, but if you skip 2014 and look at August 2013, I think the Nifty hit a low of 5,700 points. So, if you look from 2013 to 2016 , you would have gotten a compound growth of almost 15, 16, 17% in 3 years . However, I agree with your point that the pace of economic change or growth has been slower than expected .
But today, as I was saying that, I was looking at some statistics . As you know, in 2002-03, our savings rate was around 26%. Our investment ratio was 25% compared to GDP . And the corporate profit ratio compared to GDP was 2.2% . Now, it's up to 37% of GDP in savings and 35% in investment, right? And a 7% profit compared to GDP.
And as you know, this was mainly due to investment growth driven by low inflation . So, I think the Indian economy today is in the same position as it was in 2002-03, 2003-04 . I'm not talking about the stock market. But, I'm not saying that the stock market quadrupled from 2003 to 2008 . I'm not saying the market will quadruple in the next 6 years .
But, economically , I think we are on the verge of a major turning point. Today, corporate profits account for 4% of GDP . Inflation is at four to five percent. Investment as a share of GDP is 29%. The savings are 33% . So, in my view, savings are going to increase . Savings rates are going to increase.
Investment is going to increase with GDP . Inflation is low. Consumer demand is increasing again . So, I strongly believe in saying that India will grow at 7, 7.5, 8%. In my opinion, I think India is going to keep 8% growth as its new normal growth level. And, I think we will slowly move towards 10% .
In terms of economic profit, I think there will be a big improvement in the corporate profit percentage of GDP. Therefore, there will be a big boost in corporate profit growth . When will it start? Rakesh, when will it start? That is the question. You know, you're right. I mean, this is going to happen .
But, we keep talking about this U-shaped growth , and we keep putting it off every few quarters . We haven't seen that investment growth you're talking about yet . This is inevitable. This will definitely happen. But do you think you can predict the exact time , or will this continue to test your patience as it has for the past year and a half ?
Look, the markets do n't let you make money easily. You have to have faith. Everyone's patience and determination are being tested . Only then can you make money. But, the truth is that the monsoon has failed for the last 2 years . I think the government has taken many useful steps. Those measures will take time to bear fruit.
Given the prompt , I assume this will be like the story of 'The Wolf Came' . In some of the companies I'm in contact with in the cities , I'm seeing a resurgence in consumer demand . I think we have had a good harvest. So, I think there will be a revival in both consumer demand and investment. One obstacle is our inability to fully identify and resolve the problem of non-performing loans (NPA) in banks .
I really liked what happened at Axis Bank last quarter. Because, all of this is only now coming to an end, and when it reaches a point, it will be resolved . When bad news started coming from ICICI Bank and some other banks, we thought we were past the worst, so do you think everything is clear now ?
But every quarter brings some new shock. Are you worried that there might be more to come than what we've seen, as this bad situation from corporate banks continues unabated ? No, I had the same opinion last year , but now there is more that is known than unknown. That's how I say it. Last year, there were more unknowns than knowns .
I think the government itself is confused about which way to go. The problem is, they don't solve anything . I do n't know why they haven't resolved the Kingfisher issue. If he offers at least 5,000 to 6,000 crores, then accept that . So, I think we need to resolve this process at a very fast level .
I think we'll definitely have to do that. There is no other way. We will again talk about all sectors like banking, but the biggest corporate news of the past year is what happened at the Tata Group ahead of Diwali . I know you were a shareholder in stocks like Tata Motors, Titan and Rallis . When you heard the news from Bombay House, what was your first reaction?
Look, let's not just talk about this incident, let's look at what we're dealing with. As you know, Tata was founded in 1868. It has been 148 years . You know the only stock in the Dow that has lasted a hundred years? They faced two world wars . They built India's first steel plant, first power plant, first five- star hotel, first airline, first commercial vehicle, first software company, first large- scale jewelry company, and India's most profitable watch company .
This is the Tata company. Ultimately it belongs to a trust. Is n't it? So, the way people are reacting, do you think an incident like this will have a lasting impact on Tata ? It is a trust-owned company, India's largest industrial conglomerate, which has survived two world wars and whose primary objective is to generate wealth for society rather than individual wealth .
So, I'm not worried about this . We don't know the reasons, but there must be valid reasons for what they did . I know some of the independent directors of Tata Sons and I respect them greatly . They would not have agreed to this decision without a valid reason. So, I think all these controversies will subside .
Many observers have been shocked to hear the idea that these directors are not acting independently as the market thinks, rather they are listening to Ratan Tata . Do you accept this argument ? Yes. As you know, Amit Chandra is an independent director . He donates 80 percent of his income to the foundation.
That man has no desire for any position . He is not beholden to Ratan Tata. He considers what is right and what is wrong in his own eyes . I will tell you this. So, I respect independent directors, we do n't know what happened there. So , how can we judge ? We are not among those who know these facts.
I don't think Tata would want to make all the facts public because it would be like throwing mud at themselves . If they feel that any questionable decisions have been made , and if they make it public today , it would be like throwing mud at themselves. That's what I think. I do n't know anything. Therefore, I think it is wrong to judge anything on this matter with incomplete knowledge.
Furthermore, I am not questioning the motives or integrity of the directors of Tata Sons . I am confident that the Tata Group will recover from this and continue to contribute to prosperity and society as always . Of course it should be that way , but Rakesh, these allegations are coming from the top, and that too from someone who has been in charge for 4 years .
For external financial managers , those who hold Tata Group shares , it is not wrong for them to wonder whether the situation within the group is truly dire or whether decisions are not being made on merit at the leadership level. Are the balance sheets of many group companies as confusing as Cyrus Mistry points out?
Should we invest in these companies if the decision-making process is like this? It is natural for those who hold these shares and those who do not know what is happening at the board level within the group to feel a little nervous . Well, with all due respect to Cyrus Mistry, he should have told all this to investors when he was the chairman .
He was in a dilemma. What was he doing ? Why was he silent? If he thought the Nano project should have been shut down , he was the chairman of Tata Motors . He should have closed it. Whose permission should he legally expect ? So, I think that if one makes 10 decisions in any group, it is likely that one or two or three of them will be wrong.
Tata Steel bought Chorus, just like Telco bought Dial-Up. Therefore, I do not question the fairness of any decision made . As an investor, I am not nervous in any way . I think the faith and tradition of the Tata Group will rise above these petty squabbles . It is fair to say that these decisions were made in good faith, some of them were right and some were wrong, and that is part of any business process or business cycle .
I accept that opinion . But Rakesh, as a shareholder, are you hurt or angry by the things that have come out of Bombay House , and are you planning to take any action ? Depending on how things went with the former leader, you may have to choose between selling your shares and exiting or seeking legal recourse .
Are you planning to take any action ? Let me tell you something , I never get involved in any lawsuits in my life . If the stock falls because of this fight , I will consider buying or selling . I may or may not buy it , but I will definitely think about buying it. There may be other reasons why stocks rise or fall, but Mr.
I don't think the stocks will rise or fall just because Cyrus Mistry was removed . Now for a break, after the break, we will continue our conversation with Rakesh Jhunjhunwala in this Diwali special. Don't go anywhere .
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