Investing In Value And Multibagger Stocks

"Whenever I make an investment, I take advice from Rakesh," said Kedia. That includes the preferential stake he has just taken in Atul Auto, announced by the company on the BSE website on Wednesday.

Subject to the company's board approval, Kedia will be allotted 5,00,000 shares, taking his post-issue stake in the company to 13.92 per cent.

Atul Auto manufactures three-wheelers and competes with Bajaj Auto and Piaggio. While three-wheeler sales in India stand at 4 lakh per annum, Atul Auto has the capacity to manufacture 35,000. It is this and the fall in the stock that has made Kedia increase his stake in the company, from the 5.5 per cent he held earlier.

"It will not be difficult to sell 35,000 three-wheelers in a 4 lakh per annum market," he said. Besides, the company, which had to recall 2,000 vehicles last year for faulty engines it had acquired from Lamborghini, has now terminated its agreement with the Italian engine supplier.

"Greaves Cotton will now supply all the engines, and there will be a transformation in the company. It is a prudent time to buy for the long term," Kedia said.

Kedia, who invests only for himself, and does not take positions on clients' behalf, said he owns significant stakes in around 25 companies. Aegis Logistics (3 per cent), Tata-promoted TRF Ltd (1.5 per cent), Cera Sanitaryware (3.3 per cent) and Stewarts and Lloyds of India (6.2 per cent) are some of them, according to data on shareholding pattern available on stock exchange websites.

Explaining his interest in mid-caps, Kedia said: "They are usually available at much cheaper valuations, and if it's a good company, they tend to rise much faster," he said. Lower liquidity in them compared with large-caps, he said, sometimes works to his advantage.

Kedia also indulges in a little bit of speculation. "Trading has nothing to do with fundamentals or the balance sheet. To be successful in trading, you need to be an expert timer. In trading, I don't follow advice or tips; I just rely on my intuition," he said.

That is different from his investment philosophy. "As an investor, I am trying to copy Rakesh. I am just 1 per cent of him in knowledge, wealth and the contacts, but I take inspiration from him," Kedia said.

Kedia talks of many instances when he had gone to Jhunjhunwala's office, house or his favourite haunt at Geoffrey's on Mumbai's Marine Drive, to seek advice.

"He encourages me and gives me the confidence to play for larger stakes in companies. Earlier, I was afraid to buy more than 5 per cent in any single entity," he said. Jhunjhunwala could not be contacted for this article.

On markets and its turmoil, this high-stakes player is bearish for the near term. "The markets can correct a maximum of 20 per cent from here. Only the new year will bring some hope," he said. But over the longer term — by December 2010 — Kedia expects the Sensex to go up to 30,000.

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