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Masterclass with Super Investors

Raamdeo Agrawal


Raamdeo Agrawal is a CA by qualification and is the founder andjoint MD of Motilal Oswal Financial Services Limited. His investment philosophy is dependent on the QGLP framework, which is to own companies that meet the parameters of Quality, Growth, Longevity and Price.


His early life: 

Raamdeo Agrawal was born in a village near Raipur, Chhattisgarh. He went to Raipur at the age of 10 years and completed his schooling there itself. He started his CA exam preparation due to his mother’s persuasion. He finally passed the CA exam at the age of 27 years and shifted to Mumbai thereafter.


How did he start investing in stock markets?

Raamdeo started his investment journey by advising his elder brother to invest ₹4-5 Lakhs in the stock market in the year 1980. This was prior to completing his CA. Post CA qualification, he rushed to apply for equity research jobs but could get an interview in only one firm called Aditi Investments. He was very passionate about investing and hence read about 250 balance sheets and also kept  track of the company's capacity, location, utilization, cost structure, profitability, etc. In 1986, two years into equity research, he wrote a book called Corporate Numbers Game.


Start and evolution of Motilal Oswal Group

Motilal Oswal Financial Services was started jointly by Raamdeo Agrawal and Motilal Oswal. Raamdeo met Motilal Ji by chance. They were staying in the same location in Mumbai and  soon became friends as their common interest was the stock market. Hence they planned to start something together, and hence was the start of the brokerage firm named Motilal Oswal in 1987 (when Raamdeo was 31 years of age). During the Harshad Mehta Scam, they started with 10 Lakhs of investment and made 30 crores in a matter of just two years!How did he grow his capital from 10 Lakhs to 30 Crores?


During the year 1992, the index itself went from 1000 to 4200 in less than two years. Added to this was the fact that  trading during that time had grown to a great extent. The 1.5% brokerage was just a cherry on the cake. 


The extent of market strength at that time can be seen from the fact that Raamdeo could double the money many times in a matter of settlement period (which was 20 days during those times).


Hence they were able to convert ₹10 Lakhs to ₹30 Crores. But Raamdeo also recalls how the burst of the scam took a major portion away. When the scam broke out, a major portion of their portfolio was in the banking sector. Hence the ₹30 Crores became ₹10 Crores. But still ₹10 Lakhs to ₹10 Crores over two years a great deal.


Raamdeo Agrawalshares his experience of the 1992 crash: 

Although the market fell vertically during that period, they were safe, as Raamdeo recalls that they were a zero debt company.


How did the firm grow from there?

Raamdeo was taking care of research and advisory, whereas Motilal ji was taking care of everything else like accounting, operations, banking, stock exchange, delivery, etc. By 1995-97, they had grown their research division substantially and were investing about 25-30% of their revenues in research. Interestingly, Nirmal Jain, who now heads IIFL, was the research chief at Motilal Oswal back then. 


All this contributed to the firm portfolio growing to 100 crores by 2001. As a matter of fact, they started with only ₹10 Lakhs in the year 1987, which has grown to 100 crores in 14 years, generating a CAGR of whooping 85%.


Delegating work  is a very important trait that Raamdeo gives to any budding entrepreneur.

Another piece of advice is to keep hunger alive. In the year 1990 they had ₹10 crores which itself was a big amount, but they kept on investing and growing. He is very much inspired by Buffet on this trait.


In 2007, they went public with a massive ₹6000 crores market cap. By this year, the portfolio value had risen to ₹500 crores. The market crash of 2008 again brought the portfolio value to ₹225-250 crores. However, this was regained back by the year 2010, which went on to become ₹700 crores in 2013. They had kept a very concentrated portfolio of 20-25 stocks. 


2013 was also a marquee year. This year they framed the QGLP (Quality, Growth, Longevity, Reasonable price) investment philosophy and thereby sold all the personal investments of ₹700 crores and invested them in the Motilal Oswal mutual fund. This was done as a part of a good governance exercise in order to keep the investors aligned with the MF investors.


Lessons from his journey:

  1. Never take debt in the stock market.
  2. Do not get blown away by drawdowns. Raamdeo himself has seen losses as high as 50-70% many times in his career.
  3. Have conviction in your portfolio and hence hold a concentrated portfolio of quality stocks.
  4. Investing is about envisioning first.
  5. Buy and hold forever. Also, buy stocks in a way that you don’t lose money.
  6. Never let tax rules interfere with your investment decisions. Raamdeo recalls a stock named Mastek. He bought the company in June 1999 at a per share price of ₹ 200. By March 2000, it had become ₹ 4000 and the stock was 40% of his portfolio (about 40 crores). However, due to the short-term capital gain being taxable, he decided to hold the investment for another 3 months. In just 3 months the stock crashed and almost became zero.
  7. He is interested in investing in stocks that can double in 3 years.
  8. A Company’s management should have three important characteristics: great competency, passion for growth and unquestionable integrity.
  9. Dividends play a very important role in investment returns. When a company increases its dividend payout, it generally signals good stock price growth as well.
  10. Read a lot. Raamdeo reads about 15-20 books every year.

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