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‘Watch’ out! GDP slowdown has Jhunjhunwala among its victims

Titan, the crown jewel of Big Bull’s portfolio, tanked 3% after the co cut its FY20 guidance.

Updated: Sep 03, 2019, 03.52 PM IST
NEW DELHI: A few minutes into Tuesday’s trading, the value of ace investor Rakesh Jhunjhunwala’s portfolio was down by Rs 200 crore. Titan, the crown jewel of Big Bull’s portfolio, tanked 3 per cent after the Tata Group firm trimmed its FY20 guidance for revenue growth in its ‘watches’ division, citing a demand slowdown.

Titan is not the only stock in Jhunjhunwala’s portfolio, which has fallen on slowdown concerns, but it is his most well-known holding. Jhunjhunwala and his better half Rekha Jhunjhunwala together own 7.05 per cent stake in Titan, which was worth Rs 6,700 crore after Tuesday’s fall.

While jewellery is a key segment for Titan, the watches division accounted for about 13 per cent, or Rs 2,441 crore, of the company’s overall sales in FY19. Titan, in fact, is India’s largest watch maker, controlling nearly half the watch market.

Shares of the jewellery maker have eroded 20 per cent of market value from its 52-week high of Rs 1,345 hit in July this year, on slowdown in the jewellery segment. The company recently said that growth target of 20 per cent for the jewellery segment was at risk.

‘Hold’ ratings on the stock have risen to 10 from just 3, three months ago, as analysts await the festive season with bated breath after a six-year-low GDP print for June quarter.

The entire spectrum of consumer firms is hoping for a revival in the festive season, which some analysts say is unlikely without further government sops.

Among Jhunjhunwala’s portfolio stocks DHFL is down 81 per cent year to date. The debt-laden lender’s board on Friday approved conversion of whole or part of its debt into equity shares, which may result in a change in ownership.

Credit Suisse in a recent note said while aggregate liquidity has turned surplus, the bond market has continued to differentiate in their willingness to fund NBFCs. Edelweiss Financial Services, a Jhunjhunwala stock, has dropped 37 per cent so far this year. A 50 per cent drop in the NBFC’s June quarter profit was partly due to higher provisioning towards its wholesale book.

For Escorts, another Jhunjhunwala investment, the management insists that tractor financing was never an issue as tractor is treated as a priority segment, but the overall demand for tractors has been hit due to delayed monsoon and dampened sentiment. Besides, the company says its construction equipment business has been hit due to an industrywide slowdown on account of financing issues and delayed payments for ongoing infrastructure projects.

Escorts, which reported a 19 per cent drop in August tractor sales, is down 27 per cent year-to-date.

“There is no one thing that can revive sentiment. We need a series of measures to improve sentiment,” Jhunjhunwala recently told ETNOW, adding that the steps taken by the Finance Minister will help revive sentiment in the economy.

Jhunjhunwala said he has never seen such pessimism in the market. “It looks overdone,” he said. That said, the ace investor noted that it was way too much to expect an immediate market rebound.

Jhunjhunwala owns over Rs 12,000 crore worth of stocks. Despite the recent fall, shares of Titan are still up 16 per cent year-to-date, which have so far helped this portfolio stay afloat. “In Titan, the growth momentum is still intact despite higher gold prices. The festive and marriage seasons are on and the scrip has corrected from all-time highs of Rs 1,300-odd levels to sub-Rs1,000. I think it would be a good opportunity for investors to add it into the portfolio,” Yogesh Mehta, Founder, Yield Maximiser, told ETNow last week.

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