The investment journey of Value Research’s Dhirendra Kumar
9 min read . Updated: 03 Aug 2022, 12:48 AM IST
PremiumKumar says 90% of his money is invested in equity through shares as well as equity funds
A fax machine and a printer: That is what Dhirendra Kumar, founder and chief executive officer of Value Research, considers his first-ever investment to be. He bought the equipment for Value Research, the company he founded in 1992. Kumar has a venturesome approach to investments and so 90% of his portfolio is in equity in the form of shares and mutual funds (MFs) and the rest is cash and real estate holdings. International stocks also form a part of his portfolio, through active mutual funds. Kumar reveals his investment details and how he came to found Value Research, in an interview with Mint for the special ‘Guru Portfolio’ series. Edited excerpts:
Take us through your financial journey from the time you started Value Research.
I did not invest in the initial period. I always had an idea that I have to invest and I have to save, but I never got an opportunity because I was too busy building Value Research and running a business. You can say that I was fully invested in equity, and that happened to be my company. I remember my first initial investment was buying a fax machine, which was quite an investment, or buying a printer. That was a very sizable investment of ₹15,000 - ₹18,000 in those days.
At what point did you start investing?
All my investment was happening in the company, acquiring assets, buying workspace and things like that. But, my initial investment for the first seven-eight years were only tax saving funds, and they were quite phenomenal investments. In fact, the foundation of my net worth is built on those investments.
Do you remember which was your first ever mutual fund pick?
I came for my graduation to this college of business studies in Delhi in 1987and it wasn’t a prominent institution then. I was the first student who enrolled in the college in its first batch. I was the first collector of all the physical information on MFs. I used to buy 6-8 newspapers. To put things in perspective, my cost of living in those days was ₹500, and out of this I spent ₹300 a month on newspapers. I actually used the paper clippings to make a scorecard of MFs.
In the 1990s, there were about eight MF companies, while MF regulations did not exist. And in the final year of my exam, I persuaded my parents to move a substantial part of their fixed deposits into a MF which was just getting launched. This fund was Magnum Multiplier Scheme, launched in August 1990. Till January 1992, when the Great Indian Scam happened, the market was on fire and went up by two-three times in a span of two years. All the funds were closed-end at that time and they were listed in the market. Our money multiplied 16 times in a span of just two years.
Is to safe to say that if there were no Harshad Mehta bull market, there would have been no Value Research today?
That was definitely a great provocation, but I would have been in the information business anyway. The foundation for setting up an information business was done prior to that. It was created out of boredom and a result of pursuing studies in a not-so-happening college.
Were you able to get out in time before the market crashed?
From the clippings, I had a nice tabulation of the NAV (net asset value) of the respective funds. The price was changing every day, but the NAV was changing every three-months, with a two-month lag. By tabulating all this information, I had a clear view that the markets were insane. And I was able to persuade my parents to sell. They sold their holdings at ₹160 per unit. The price went up to ₹190-200 or so thereafter, and so we missed some part of the rally. However, we were able to get out in time.
When did you start investing seriously?
I started my investment in a open-ended fund called Kothari Pioneer Prima (now renamed Franklin India Prima Plus) in 1994. I was making some investment here and there, periodically, but it was not an SIP (systematic investment plan). I became a regular investor with Birla Advantage Fund (now Aditya Birla Sun Life Equity Advantage Fund), which was started in 1995. And before that I also had invested in schemes of Kothari Pioneer, Morgan Stanley and Taurus. But, my serious regular investment started with Birla Advantage Fund.
Did you get caught up with the Dotcom boom?
Yes, I was caught up in it and in quite a big way. The first technology fund launched in India was Kothari Pioneer Infotech, and that actually was a blockbuster. It just went up and up, never stopped. And then they followed it up with another fund called Kothari Pioneer Internet Opportunities Fund. The Infotech scheme was a big multiplier as it went up by 20 times.
At that time I really understood what real diversification is, because everybody thought that one is diversified by investing in a diversified equity fund and investing a bit in their technology fund, and then on the side investing in a set of technology stocks. This gave me an idea to launch a portfolio manager tool on Value Research which showed users what you actually owned by cutting through the clutter.
Unlike the Harshad Mehta boom, were you able to get out in time when the Dotcom Bubble burst?
In Harshad Mehta’s time, I was able to get out simply because there was a goal around that. My father was to retire in a couple of years. All that he aspired for—constructing a house post his retirement and my sister’s wedding—these could actually materialize without touching the provident fund money.
Can you give a broad classification of your portfolio; how much of it would be in equity, debt, gold, and alternatives?
Most of it is in equity and a little bit of it is in cash, which is lying in my bank account simply because I’m lazy. I accidentally have some real estate. My initial offices were owned by me personally, and I continue to own those offices. I don’t own a house in Delhi as my home requirements keep changing. I rent a house instead. You see, I live with my parents and children. I need a large house and the rent is very reasonable compared to the value of the house. However, my children are getting older and my housing requirements might change again. Plus, I only recently bought a piece of land in the mountains in the Himalayas. So, 90% is invested in equity, through shares as well as equity funds. In terms of equity break-up, I’m actually two-thirds into shares and one-third into mutual funds. All my incremental money is flowing into stocks directly today. So, 90% is in equity, about 3-4% would be in cash in my bank account, and the remaining is the land which I bought recently.
My stake in Value Research is not included in this allocation of my net worth. Actually, my family and I own 100% of the company.
Do you invest in international stocks?
I have quite a meaningful investment in international stocks, through MFs. I realized that it is better to invest globally through actively managed global funds. If you consider my overall portfolio, international stocks constitute 7-8% of it.
How have your holdings fared?
My return over all these periods , aggregated, is about 19.78% since 1994-95 and is listed over the last weighted average return, taking into account all the dividends that I would have received in my stock portfolio, or the MFs or any partial redemption. I haven’t done any redemption except when I was moving my money from mutual funds to stocks and there was one occasion when we were buying a large piece of land for our office building. I began shifting from mutual funds to stocks after we decided to launch the stock advisor service in 2016-17. I would have shifted entirely to stocks but the 10% LTCG dissuaded me.
Would you shift to debt eventually as you near retirement?
There is no such plan—1% or 2% yield on my investment will take care of my needs because my day-to-day expenses are not very high.
Do you have life and health insurance?
I have carried on with my term insurance, which I picked a long time ago. I have a reasonable health insurance cover provided by my company. I haven’t got a family health floater because my parents are eligible for the Central Government Health Scheme (CGHS).
Did you shift between equity market segments in the past?
No, most of my investments are just lying around in MFs. In fact, the average life of my investment will be more than 15 years.
One investment mistake that you want to highlight.
None, really. I don’t regret that I did not start investing in stocks earlier. If I have to choose between getting distracted and building a great equity portfolio, I think I will tilt towards building Value Research more meaningfully in an undistracted manner.
If you had to pick a success story, what is the stock or a bond that you think built the most wealth for you?
Quite a few. I have one regular investment in Parag Parikh Mutual Fund, from day one, and also in Prashant Jain’s HDFC Prudence Fund (now HDFC Balanced Advantage Fund). I have also been able to ride through the lean times. I’ve seen my money go down by 60% in 2008, then recovering all of it, and doing a full cycle with HDFC Prudence fund. HDFC Equity Fund was another scheme where my family money has been invested for the past 17-18 years. So, the return that you see in a fund’s marketing material for a whole holding period, I might have actually gotten it.
Would that be your top holding? The HDFC Balanced Advantage Fund?
Yes. But my tax saving funds are the most interesting ones. These are small investments turning into a sizable capital.
How many months of emergency fund do you provision for?
I don’t need an emergency fund simply because I have a lot of money actually lying around in my bank account. and I run a business which is quite stable.
How do you identify yourself as an investor?
I’ve been a very thoughtful investor. And I would like to be focused now. I would be willing to take some concentrated bets. My only aspiration now, because I didn’t have time before, is that I find my great 5-7-10 stocks which I can hold for the next 10-15 years.
Any lifestyle changes induced by the pandemic that would endure?
I have suddenly realized that there is life beyond work. Also, I started thinking that one should have a home that is not in a big city. That was quite a change. I also faced some health issues. Now, I’ve become far more structured, and I’m able to take time off from work.
What does wealth mean to you?
It will have to be freedom.
Were you able to go on a holiday in the past year?
I was in Dharamshala last month for some time. And before that, I was in Mussoorie for a while.
Where do you plan to go next?
We don’t plan much now. We just pack up and go.
