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OK, the market waits every year for Motilal Oswal's annual wealth creation report. Motilal Oswal has released this report for the year 2024 today, which not only examines the last five years in detail, but also presents a roadmap for future wealth creation themes. To discuss this report, Ramdev Agarwal, Chairman of Motilal Financial Services and ace investor, has joined us in the studio.
Ramdev ji, good morning. This report of yours is one that I read myself, and your team sends it to me a little in advance so that I can prepare myself. Your theme this time seems to be a very interesting one, because most people believe that if you want to create wealth, you should create wealth in small stocks.
This time your topic is creating wealth through black and white blue chips. So, first, how did you come up with this topic, and after that, we will discuss it in detail. Where did it come to your mind that creating wealth through black and white blue chips is the current trend? So, there are three of us who write this study.
I mean, I sit in my office, I am Dhru Mehta and Shrinath, who is my assistant. Okay, so Shrinath, so ne was to sell the market at a high. So, one was one topic, and the second was the turnaround, sir. Bubble's sir. We have not done on turnaround. Let's start. The first time we found it, it' fund, forget its name, he makes money only by turnaround stocks in the US.
And he wrote he talked about when ever any stock in s high in India five year high is the all time high so generally so when it falls more than 50 per so then you have to find one you find these two categories of f decided on the basis of market cap what is a blue chip and because this On the other hand, it is known what was a blue chip or what was not.
Blue chip has to be defined and I think everybody can have a different definition but for the study I think with my experience and all I said any company which has earned more than 20% for last 10 years ok and of size both so that company will term as blue chip because you have earned 20% in 10 years means you have some sense of your % or 20% RE aid they giv reliance 1 companies are respectful of the RE level ok we will take it as a blue chip yes you know because they have their own kind of stature To be the company so we will take them as blue chips and any company which has this is 7 companies and that pass now what is the biggest blue chip is the company in lo ban % % ok till % it is correction ok but below 50 percent it is bruise bruise now it is seriously bruise because some body thought in a market some body thinks that if the stock is 1000 bucks some body uise and there must be some reason behind that ok the earnings dis point ment else there, so then we went ay, and how do you buy them?
Okay, , that is purely as , yells Housing or at one time there was Je at one time, but they were not blue chips, well they were not blue chips, blue chips first, they were they have to be blue chips Did this bank make it to this bank Nifty would recover so my question is where do we decide whether it is a bruise and where do we decide whether it is not or the story is over see what it is ultimately investing is not only statistical you have to at the time see if something is bruise and hurt by 20 percent ro ok ok that i some big on 20 for last 10 percent or that can be X of Nifty also that stock that ou a given situation, it is going to survive and more importantly, 's like a Rishabh Pant getting hurt, yes, now Rishabh Pant, I mean, , let's say and , yes, he Nose batting yes and he can bat in toughest of the situations so all these blue chips of RE at 20, they like Mahindra fell from 00 to 300 they changed the management completely they changed the entire architecture they did a lot of organization when they came back it was not 300 600 but it became 3000 now it is the most expensive auto company in India at least more expensive than Maruti more expensive than tag so what I am betting on is the first one your question is correct ch one to live chch is broken bru and broken there is a difference between yes bru Mahindra I was reading your report I feel that maybe you might have used a little pen while writing that it is outdated In strategy, you took the name of Ro Moto Cope, I know because your first love is Ro Moto, you must have felt quite hurt about that, but it is also a fact that they might have lagged behind a bit there, but here also there is a slight come back, in Ro Moto Cope also, this huge come back has given us more is 5000, it has doubled in last one and a half year, , that is, where you have created so much wealth, yes, believe that this is a blow or it will come back, like Ro Moto Cope for example, I am talking about it, you had confidence that it will come back, like L 70 bucks I had no doubt but I don't have a framework.
I did n'haiya, you should buy DLF for ₹2, yes, but that was just a one- off discussion. I still have a framework. C. , or -three things in Y Bruz. stocks fall, that is a different factor. One is s which are stock related, it could be due to Covid, if % from its high, right? Yes, everything, that is, nothing is spared at that time.
Yes, except for two-four consumer stocks like Hindustan Lever, all the other banks get beaten, so at that time the static fell by 50%. No, so it has become a big blue chip, okay, and its remedy is only one, let the market come back, and when the markets come back, all ADFC, the banks' low had become one book below book, so I think ADFC has also fallen big time at that, so its remedy is only one, and Indian Hotels and Mahindra, a company related, company related, it is also company related, there are How did competition come from outside to the company?
You are peacefully earning good money, running a shop and it is found that brother, a new person comes like in telecom , if I become number one then brother, the entire competition was given for free, you mean for one year, like for the whole 10 years, yes for five years, the entire market was reduced from 12 players, three players were left and what is there in that too, then I want 50, market share number one, so you made it number one from zero, the stocks like the Indian ones, they meant the the rother, this is a big problem right now because I made maximum money in Indian, you know, in 2003, you had bought them at a lower price than the IPO, yes, the price was less, yes, the one that was there, it was a price, so the external company made a mistake The company did not do it, yes, what is the second successful companies, they misallocate capital, like CG Power, yes, CG Power, so I would say mismanagement, but take for example, you bought Mandra, you bought Tata Steel, you bought Corus, you bought Corus, all this, I mean, brother, you have make money, and people go away, they mean, they are confident, they work, then it creates problems, then getting out is a big problem and it saps all Mahindra, number one in tractors, absolutely, so that was a cash cow, then SUVs also reduce the focus, so then they sold off shares, so that is completely internal to Mandra, so there are problems, well, there can be There arre could be an internal problem, there could be an external problem and there could be a market related problem, so what happens is finally when the problems come together and along with it the market also sinks due to some reason, then you get shares at a huge a framework as to in what ways the shares of the company fall, exactly, that which is external to the company, now as an example I am saying and you have taken this very beautiful example of value, in which you have taken the example of PNB, that there is value outflow, even if PNB itself may not have done any big mistake, but both of them mean that there is external in it, that is the work, today suppose RBI has given Pvt Sec license, then see, in the private sector, many people got the license, 10 people All went down except HDFC, HDFC and Kotak, I think only two Bahubali emerged, but they turned out to be so big that they got value from 20 market to 15 market.
So value migration happened where your PSUs, I mean good clients, good businesses, all migrated to private sector for 15, 20, 25 years and actually a time had come in 14-15 when the industry profit was 110 per cent with private sector, we mean zero profit from the public sector, you know when even SBI came to literally zero profit, so that was the point of time of maximum profit in PSU banks, yes because PSU banks also you cannot wash it away because they are 50-60 per cent of the system, you know, the thing which you should not understand is that in 50, SBI is also a very deep blue chip which was 150 to 850 and still it is cheap, single Digit P is still cheap, it is still cheap, so the thing is that when you get this type of brochure like SBI, then for Rs 150, it is such that you can fill your house, you definitely had an example of CG Power in corporate governance, I mean, I remember whenever there was talk about FII holding, such a strong FII holding, a company from a good group is representing such a space, the brand name was so strong, at that time, its name used to be Compton Greaves, when such a big corporate governance issue happened here and when that stock fell from ₹800 to ₹, yes, and after that, Murugappa Group bought it, but that is the biggest change, yes, from a discredited management to a completely blue chip management, and see, actually two things happened, one, Murugappa Group came, Lion Wager came and they set the process right, they went about looking at all the stakeholders, whether it is an employee first then Other stakeholders like buyers and all of them and they did not reduce the value of shareholders to zero, yes, it means it happens in many cases, yes it happens but it did not happen in this case, but first of all they went and had a very good experience of turning around the company, so they went about looking at the company with all the stakeholders and they built relationships and as they started their tightening, the tail wind just exploded post Covid, what happened was the capex boom that came, meaning where your transformers were not selling or you did not have orders or no one was lifting, there was a waiting list of five to six years, so as soon as you started the turnaround and the tail win came, so turn around plus tail win it is a lethal combination, exactly the same, my next question is healing because if there is a bruise, then healing is necessary after that, isn't it, so what does healing create, healing and how to estimate that this bruise which is a blue chip is now ready for healing, that is Very active investors role comes, see from where it fell by 60-70, I mean understand this, it is still on the watch list, now understand what is the source of the problem here, brother, if the source of the problem is external then its repair will be done externally only, okay if it is internal then the repair will be done internally, so if suppose my management is bad, my MD is bad or some how the leadership is not content then the leadership has to change, okay, okay so the moment leadership changes by that time so much pressure is created, nobody is bad, like nobody knows what the, like CG Power was the biggest, Apple Power came, so it means it was really a huge change, yes, but many people took 15 out of 5, it became 15 out of 5, but then it went straight from 15 to 700, then the same, I mean it is still counting, so I mean what I told you that its all time Suppose it must have been ₹, suppose it became ₹, then 10 became 200, but after 200, the company became worth 700, 800, lakh crores, nothing, so this power of turnaround, so not only that turnaround will happen, but it will prosper, that is the call of the investor, in this you have written process for investors, in that the first one is creative watch list, yes, after that you have given two more and in this you have told the thought process, let's talk a little on this, yes, so first create a watch, least reason, healing, try await for buying triggers, buying triggers, don't be in hurry, just because it is not like that, after that you start looking at what is the source, try to understand the company deeply, the better you understand the company, the better you will understand its value, that first is to figure out the intrinsic value, even after falling to 50, the company is below the intrinsic value, now the price is below the intrinsic value, so you Start by understanding intrinsic value and then try to figure out the source of the problem.
Is it simply mountable? Some corporate pressure, like the guy who doesn't want 50, or what is the solution? You have to get to the first position. So it's not that everywhere right now. Like, the Aion paint and build are happening, it's definitely showing growth after so long. So, what is getting bruised and again, corporate warfare?
There, the issue is whether builders will win. You know, and how much turf will they take at 5 per 10 per cent, and how much bloodbath will happen to get at 10 per cent. So, you're watching all these things sitting outside. You're not in the stock, but at some point, you realize that neither paint is going to go anywhere, nor is the player going to grow.
So, keep this on your shortlist. So, he's a challenger, he'll become the incumbent tomorrow. So, what is good for NC today? What is good for ASH, but probably is not good for Builders, but at some point in time, the moment it is 57, then they will say boss, what is good for you is good for me, like it happened in telecom, yes, now both of them will sit and party, it is happening in food delivery, for example, both of them will sit and party, so when the challenger becomes incumbent, the industry starts recovering, yes, because that too is to build Aventura, yes, so how do you catch that bottom point of maximum price and how much do you get, it is a matter of luck as to what price you get, the market may turn bad and you get it at a lower price, yes, so you know, with these types of blue chips, you can buy a lot of blue chips, it can change your entire career, absolutely, then after spotting, spotting it properly, then it is also a question of how much you allocate and for how long you will sit, how much patience will you have to bring in it, it is a job of unlimited patience, secondly, how much capital should be invested in it, Ramdev sir, how much capital has been invested in it, then in such a situation, look, I am not a practitioner, I have just written this story.
I am Rakesh, he was just a practitioner, yes, well he used to put, he was the king of it, that Amit Goyal will also be there, he will tell the whole story, but just before his death, he bought crores of shares in Indian Hotels in 70-80, he must still have 800, now yes and what is this name, he bought Lako in less than 100, yes that is well documented, he had said this about Tata Motors many times, yes, but he had even bought Escorts like that, yes, he played sports at 10, so he had got to buy percentages of the company, I know, yes, but at 10, I remember when I started my career, on the first day I read the news, Rakesh Jajnawala buys 5 per in Paraj, then at that time I said that 5 per means, what happens in just one day, see if you have 50,000 crores, all these companies are available at throwaway prices, so start putting 500,000 Easy but I am worth suppose 100 crores then how much can I invest but even in 100 if you put 10 15 20 crores in this high convey stock because your down side is the best part why blue chips the best part is the blue chips they never go to zero except very can be one of 10 but it's judgement calls where there is litigation where there is talk of theft stay away till the cloud is not clear you know I generally Don't get into two kinds of controversial places, this one with competition is the best place, you know that sanity will come later, yes, sell the guy who is coming in, he is also coming to earn money, well, for the first time in this you have also included a little technicality, it is in the book, see the same set, if you want to get to the point of maximum pessimism, it is not my subject, it is not my content to see double bottom or all this, but then we talk to Jandan normally for that, yes, no, no, generally it is written in the book to cut the waiting period, yes, see, how do you, it is possible that you are facing problems due to this beating or any other reason, so you could be in a value trap, so how do you, how do you avoid the value trap and make it as short as possible, yes, absolutely, Ramdev Sir, now as of today, based on just one case study, which stocks do you think will fall in the bruise category, so We have given a list, see, there are some 10-12 companies in it, we are the companies which are getting bruises right now, I am not sure, the first thing is very few companies are above 50 %, so for me it is only a correction, these are not bruises, when 50C what happens, the optimum of the market, it takes time to hit it, that means a series of depletions is necessary, only then the market depletes, because people have earned so much money in blue chip, it does not go away easily, so it will take time, only one or two Adanis of Adani Group, I was coming to that, there is a lot of external and internal in it, I am not able to understand whether it is external or internal, but as long as there is a special thing about the market, yes, in this, do not do any study which you do not understand, okay, so stay away from something which you do not understand, if you understand then already you can see the bruise is deep and you know so like Asian Paints 35 has become like this and the corporate war is on and the first quarter results have come out bad, now the next three quarters will definitely be bad, so you know, well on top of that, see how things are going now, this corporate warfare is going on, consumption is bad, it comes from multiple sides, of course, now if you go and ask the competition, they say that they have no problem with the competition, consumption is bad, Q3 also got beaten, the Diwali one, that's what they are saying, brother, our problem is not with the competition, our problem is with the growth of the industry, so the slowdown of the industry is also pushing the problem, so generally what happens is that two, three, four times, three, four, five quarters come out bad, then people start getting disappointed, well, someone bought at a little below 50, someone did not read the report and suppose he bought at a low of 50 and after one quarter it came to know that it fell by another 10, then the same person goes and comes to sell, so what is this, this means that it is not that easy, it is very easy to write this, practicing this is Very tough, so the guys, I have practiced this, I have not practiced, I have practiced just the other way around, high quality companies in growth mode, that we have practiced as QGL P, this is our antithesis of my own style, absolutely, well, you have said a very wonderful thing, in your wealth creation standard, you put 100 biggest wealth creators, in that you put most consistent big wealth creators and also put biggest wealth creators, personally, what is your favorite wealth creator with consistency, I love to see, first to our old one is largest and fastest, fast first, okay, when actually, when both the largest and fastest come together in a single company, which happened in the time of tech, when you made it 1 lakh crore by doing infosys.com, that is possible, but making 1 lakh crore to 10 lakh crore is very tough, so when both happen, it means something very big, that is, an economic opportunity has come What was meant by WATU, it means that from one billion dollar export, export became 50 billion dollar, India became a global software powerhouse, Digital India, so this type of transformation that is happening right now in retail, in quick commerce, in Trent or Zomato etc., what is happening, Zomato Zepto and what is the name, Blanket, what is happening in this is a huge transition, that is, a trillion dollar kind of opportunity, even if there is a transit of goods at 10-15, then there is a big opportunity, absolutely, you know, and rapid means it is happening at a very fast pace, absolutely, and this is what Rakesh ji and Ramdev ji have mastered, when to take them in good quantity, but Ramdev sir, we have discussed this completely, we have studied yours completely, I can talk about this for three hours, it will not end, this is such a great topic, but now I would like to ask you a couple of questions on the current market scenario, there was a big development yesterday.
What is your view on the appointment of the new RBI Governor and the continuity and all that will remain in the market at this time? First of all, the work done by the outgoing Governor in the last six years, the kind of stability he brought and you know, so he really handled it with a lot of maturity, so I think he is leaving a fantastic legacy for the new Governor.
Now, the new Governor is coming from a brilliant background, of course, you know, into the IAS and Revenue Secretary, and so I think he must be knowing the pain of slowing down of the tax collection, and all that. So, I think I am a bullish guy, always an optimist guy, I would expect that he will accelerate the credit flow in the system, and for that, what all needs to be done, that of course he understands, and that, see in my mind, GDP growth means credit growth and GDP growth means tax growth, so everything is equal to, so If now what the tactics and how they will approach the bureaucracy and finance ministry and RBI and fiscal authorities I don't know that will see unfolding in the next 10 days exactly one more thing the market saw a big correction the earnings season was very bad last time we you always say that you cut a little from the numbers you give so but is there any chance Ramdev sir that this pain will end or will there still be a little more pain in the market my lon the [ __ ] end of this thing earnings decreased earnings depotment because it was really because of this first quarter problem of election and then doubt and then intense everything happened together and election happened so people all because it was one of the most intense election you know it was not happening va yes so what all those election ke sab woh chachcha hain so now I think now they will start warming up the machine so I feel Isn't it q3 will be anything worth while I think in q4 it will be a bumper this thing but the real real spill lore and action will be in the first half of next year so q4 and first half of next year I would be very hopeful that the economy will roar back into the lead by c if you see it is also written in our report if you see the actually earnings rate change from 2020 it was about 50 457 to be exact nifty earnings in 2020 and it was lingering at about 78 per for last four years then in post covid it shot off at the rate of 18 per and in next four years it will double 000 that was in last year was 24 000 now they are expecting same 15 per growth which got trip this year I think there is a fundamental shift in the structure of the economy and So there is a complete change in the type of companies that are showing the growth, from my point of view pre-COVID they were very very compensation dominated post-COVID it became capex dominated more but government capex dominated so the type of companies that did very well till 2020 like lever Asian pens mero I think those companies are struggling right now c Ramde Sir thank you very much and the presentation that you will be doing this evening and the detailed presentation that you will be doing on wealth creation study I look forward to that thank you so much for joining us in the studio today thank you so much that's all for this show stay tuned with CNBC Awaaz [Praise]
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