Rakesh Jhunjhunwala and Harshad Mehta stand as two of the most prominent figures in the Indian stock market. Jhunjhunwala is celebrated as the ‘Big Bull’ and ‘Warren Buffet of India’, while Mehta’s notoriety arises from his connection to the 1992 securities scandal. Emerging from modest beginnings, both individuals ascended the ranks by making strategic investments in stocks, leading to substantial gains. Jhunjhunwala earned a reputation as an investor with a Midas touch, consistently achieving remarkable profits from his shrewd investments. Conversely, Mehta garnered insights from his extensive involvement in the Bombay Stock Exchange before resorting to illicit methods to capitalize on stocks.
Rakesh Jhunjhunwala Story
Rakesh Jhunjhunwala, an Indian businessman, boasts a net worth of $5.8 billion, according to Forbes. After graduating from Mumbai’s Sydenham College, he embarked on a professional journey with several companies.
Despite his father’s assistance in entering the stock market, Jhunjhunwala initially lacked personal funds for investment. In 1985, with a modest capital of Rs 5000 and the Sensex at 150 points (contrasting the present 58,000 points), he took his initial step. Swift success followed with ‘Tata Tea’, yielding Rs 5 lakhs profit from 5000 units purchased at Rs 43 per share within three months.
In 1989, he secured 4,00,000 Sesa Goa stocks at Rs 25 per share, a period marked by the iron ore exporter’s significant losses. Despite prevailing challenges, Jhunjhunwala anticipated unwavering global demand for steel and iron. This foresight materialized into substantial gains as he strategically sold the stocks in three parts – 250,000 shares at Rs 65, followed by the remaining shares at Rs 175 and Rs 2200.
During the 1989 National Budget announcement of VP Singh, the other stock investors were convinced that the budget would be public-friendly given the economic environment. But Jhunjhunwala invested heavily during this period as he believed that the budget would be business-friendly, as Mr. VP Singh was from a business background. It turned out to be true, and as investors flocked to the stock markets, rallying stock prices, Jhunjhunwala made a good profit.
Ranked as the 36th richest person in India, Jhunjhunwala passed away, leaving behind a legacy with a net worth of Rs. 40,000 crores. His investment portfolio encompassed Star Health and Allied Insurance Company, Metro Brands, Fortis Healthcare, Bilcare Ltd, Canara Bank, Jubilant Engravia, and Man InfraConstruction, among others. Remarkably, his favored stock was Titan, which he acquired for Rs. 30-32 between 2002 and 2003. Back then, Titan’s stocks were at an 8-year low due to a clash between management and labor unions at their Tamil Nadu plant. However, Jhunjhunwala recognized Titan’s robust fundamentals and maintained profitability, even amid significant provisions. He adhered to investing in shares with growth potential, amassing a 5.1% stake in Titan valued at over Rs. 11,000 crores in the quarter before his passing.
Harshad Mehta Story
Harshad Mehta developed an affinity with the stock market while working as an insurance agent in New India Assurance Company (NIACL), Bombay. In 1981, he began work as a jobber for stockbroker Prasann Pranjivandas and eventually started his brokerage firm called ‘Grow More Research and Asset Management in 1984. His company actively started to trade in 1986 and built up a good reputation as many prominent personalities started using his services. Mehta had investments in companies such as Apollo tires, BPL, Reliance, Videocon, Tata Iron, Steel, etc.
From 1990 to 1991, he was also portrayed as ‘The Big Bull’ as he was known for driving up the prices of stocks in the market. Notably, he managed to manipulate the price of ‘ACC’ from Rs 200 up to Rs 9000 (a 4500% increment!) within 3 months by aggressively purchasing the shares. The day he sold them off caused a crash in the stock market.
He required large sums of money to carry this out and his source of funds was illegal. Mehta would use ‘ready forward deals’, an arrangement between banks to issue short-term loans against the collateral of government securities, to get funds. He would act as the broker between banks and use the securities received from one bank to get a cheque from another bank under his name. Then he would use it to make his investment and eventually liquidate his shares to provide money to the first bank providing its treasury securities. Also, he colluded with some bank employees to generate and issue fake ‘bank receipts’ as proof of completing bank transactions.
His method of leveraging loopholes in the banking system was uncovered by journalist Sucheta Dalal on 23rd April 1992, through her column in ‘The Times of India’. Mehta was arrested by the CBI and charged with 72 criminal offenses along with over 600 civil cases by several financial institutions. He was banished from the stock market and convicted for 4 cases before his death in 2001.
Who was the best?
Rakesh Jhunjhunwala and Harshad Mehta both possessed the strategic acumen necessary for success in the financial market. They both placed their bets on the iron and steel industry by investing in companies such as Tata Iron and Steel and Sesa Goa. Additionally, they placed their trust in the Tata conglomerate, a mature company that promised favorable returns with relatively lower risk.
The duo earned their reputations through their notable achievements in the stock market. While Rakesh Jhunjhunwala continued to navigate the right course, Harshad Mehta resorted to unlawful activities to amplify his capital and profits. Amid the 1992 scam, Jhunjhunwala claimed to have made around Rs 30-35 crores by short-selling stocks, leveraging his awareness of the excessive inflation of stocks manipulated by Harshad Mehta. Meanwhile, Mehta amassed a peak net worth of over Rs 3500 crores but ultimately lost it all after facing prosecution for fraud.
Harshad was a beast but with deception, Jhunjhunwala was a careful wolf.
In summary, both personalities demonstrated how they amassed immense wealth through their stock market investments. This underscores the importance of self-analysis when engaging in equity investments, avoiding reliance on rumors. Stock investments offer the potential for substantial returns, which can counter inflation and contribute to wealth accumulation, thereby presenting an avenue for achieving financial strength.
Even figures like Mukesh Ambani and Ratan Tata find it challenging to navigate the market’s fluctuations and swings. However, by settling all debts, Harshad Mehta achieved something unprecedented, setting him apart as the original Big Bull. Mehta not only fueled the surge in stock values but also brought substantial profits to small stock brokers, entrepreneurs, and larger investors alike. At the peak of his career, Harshad’s net worth reached 4000 crores. Ultimately, one legacy was built on knowledge and perseverance, while the other was built on deceit and treachery.
