A law graduate who fell in love with equities, manages Rs 1250 cr portfolio – meet Porinju Veliyath

http://www.moneycontrol.com/news/business/markets-business/a-law-graduate-who-found-his-love-with-equities-manages-rs-1250-cr-portfolio-meet-porinju-veliyath-2376899.html

A law graduate who fell in love with equities, manages Rs 1250 cr portfolio – meet Porinju Veliyath

MoneyControl  Sep 04, 2017 12:22 PM IST

By Kshitij Anand

A law graduate who found his love in equities back in the year 1990 is now one of the most influential small-cap stock pickers in the country today.

Kochi-based investor Porinju Veliyath's journey from an investor to Equity Intelligence, his firm which managed over Rs 1,200 crore worth of portfolio.

He likes to keep things simple when it comes to investing and does not shy away from investing in uncongenial ideas. He has already spotted many stocks which gave multibagger returns of up to 300 times.

He believes in Value Investing because it is all about Price and Value.

Few stocks which gave multibagger returns include names like Wockhardt (120), Orient Paper (6) Piramal Enterprises (340), Shreyas Shipping (20), Balaji Amines (100), Force Motors (400), Biocon (150) and Jubilant Life (300) are few past wealth creators under his PMS.

FCEL (10), JBM Auto (170), L T Foods (20), DCM Shriram (120), Geojit (32), Federal Bank (45) and TCI (+TCI Xpress) @ 250 are some of the performers he still holds.

Here is an excerpt from his exclusive interview with Kshitij Anand of Moneycontrol:

Your qualification, age, size of your portfolio

A Law Graduate, I am 55 arithmetically – My firm, Equity Intelligence is a SEBI Registered Portfolio Manager since 2003; we manage over Rs 1,250 crore.

At what age you started investing in the market?

I didn’t have any capital to start investing at beginning of my equity career. In fact, it was not a ‘purchase’ that turned out to be a gold mine for me.

It was a ‘sell’ at the peak of 1992 which helped me own a 475 sq ft apartment in Mumbai suburb. I had short-sold SBI Magnum at Rs 165 while its NAV was 32.

The stock peaked out at 180, next day (23 April 1992) and fell sharply. I covered at near zero levels adjusted to the ‘badla’ gains in few months. In a bi-weekly settlement system, you could short-sell any stock and carry forward with the corresponding buyer with ‘white kapli’.

What is your investment philosophy or investment mantra?

‘Keep it simple’ is my investment mantra. I don’t have any hard and fast rules while picking stocks. I am very flexible and open to any ideas which could create wealth, including unconventional ideas. SEBI guidelines is the only ‘rule I follow while picking stocks’.

List of stocks which have already given multi-bagger returns and how much?

There are too many stocks which have already given multibagger returns. Wockhardt (120), Orient Paper (6) Piramal Enterprises (340), Shreyas Shipping (20), Balaji Amines (100), Force Motors (400), Biocon (150) and Jubilant Life (300) are few past wealth creators under PMS.

FCEL (10), JBM Auto (170), L T Foods (20), DCM Shriram (120), Geojit (32), Federal Bank (45) and TCI (+TCI Xpress) @ 250 are some of the performers we still hold.

What do you prefer the most – largecaps, midcaps or smallcaps/microcaps and why?

The size doesn’t matter in Value Investing! It’s all about Price and Value. I don’t care about the size of the company even if the ‘Value’ is significantly higher than the price.

Everyone knows the price; understanding ‘Value’ is name of the game! Every successful investor has evolved a unique style of estimating the value and picking stocks. It is very difficult to explain the process.

Where do you see markets in next 4-5 years?

Equity will continue to be most rewarding asset class in next 4-5 years. Indian economy is at an inflection point with significant structural changes.

The economy is shifting from black to white and unorganized to organized, which will benefit listed companies, as most of them are conducting business in an organized manner.

The not-so-professionally managed companies also will change for the benefit of minority shareholders due to improved governance and embrace of professionalism. After historic reforms like demonetization and GST, there won’t be any incentive to remain ‘chor promoters’, siphon out profits and avoid paying taxes.

Any top bets which could turn out to be a gold mine in next few years?

Our latest picks are GVK Power & Infra, Kaya Ltd, and Emkay Global – Equity Intelligence PMS owns over 5 percent of these companies.

They have many challenges currently and the numbers do not look impressive. We are betting on their potential to create shareholder wealth over next 5 years in the changing economic environment.

Who is your investment guru?

I don’t believe much in Gurus, Gods & Prophets – learning has no limits and it is a continuous process. It is better to keep your eyes and ears open because there are wonderful people around you.

I have been inspired by many personalities (friends & associates) like Uday Kotak, Chandrakant Sampat, Radhakishan Damani and C J George.

I have also been motivated by many ordinary people, my friends & colleagues. Learning is an art; books and Gurus are not very important.

What are your hobbies?

I enjoy farming and spend 2-3 days in a week at the farm. Apart from that, I love traveling too, just came back after a solo-trip to Scandinavian countries.

It is interesting to experience and learn about the history, culture, lifestyle, and economy of different countries. Sometimes you get inspired like the cycling habit of people in Copenhagen.

What books are you reading?

The latest book I read in full was Civil Procedure Code & Law of Limitation, 27 years ago. I have attempted to read many books but failed to go beyond 5-10 pages.

There is a good collection of books at home, as my wife and children read a lot. I read online, have subscribed to Economist but do not remember reading an article in full. Love to write and read on Twitter due to its 140-character limit.

‘Nifty may touch 13,000 in three years’ - Porinju Veliyath

http://www.thehindubusinessline.com/portfolio/your-money/nifty-may-touch-13000-in-three-years/article8633203.ece

Common sense is more important than number crunching today

“We are a very resourceful nation that needs to be guided well by politicians. We can add a trillion dollar to our market capitalisation over the next two to three years,” says Porinju Veliyath, MD & Portfolio Manager, Equity Intelligence India, in a chat with BusinessLine. Edited excerpts:

From a law background, you have moved to fund management now. How did you make this transition?

Equity has been my passion since college days. I used to be a regular at the public library in Kochi during the ’80s, was inspired by stories of CEOs, the size of corporations and the value of brands.

After graduating in law, I took the next train to Mumbai, the capital of capital markets, and started my career as a floor trader at Uday Kotak (Kotak Securities) in 1990.

It was an exciting journey. I worked with Parag Parikh Securities during the late ’90s, got exposed to institutional dealing, equity research and fund management. I returned to Kochi, my hometown, in 1999.

What was your first investment after returning to Kochi?

Back home, I was amazed to see the market cap of Geojit Securities at ₹2.5 crore — a professionally managed futuristic business — available at below book value, four times the price-earnings multiple and 6 per cent dividend yield.

I invested most of my money by acquiring nearly 8 per cent of the company’s equity. The market cap moved to ₹3,000 crore in a few years and now quotes at ₹800 crore (bullish now).

Kitex Garments was another Kerala company that surprised me with two times the price-earnings multiple.

I bought significant stake under portfolio management system at around ₹30 crore market cap, which moved up to ₹5,000 crore and is currently valued at ₹2,200 crore (well-priced).

What are the lessons you learnt from the market in the last 25 years? What is your advice for investors who plan to remain invested in equities for the next 25 years?

Keep investing, simple! We don’t know how the world will look like in the next five years, but one can predict with reasonable precision how India will be in five years! Look at the big picture; India is too small with a $2-trillion economy and has a long way to go.

Keep your eyes and ears open for ideas, which are in abundance in the world’s fastest growing economy.

With export growth stagnant and debt levels high (among both public and private sectors), what are the opportunities in the capital market over the next five, 10, 20 years?

I think these are not such vital parameters, considering the global economic scenario, to measure the health of the Indian economy. China’s overall debt is around three times GDP compared to India’s roughly one time.

Our public debt is around 50 per cent; of this, external debt would be less than 2 per cent. It would be meaningless to look at the absolute export data without considering the global economic scenario and the fall in crude prices.

I think imports have also fallen and our trade deficit is near a yearly low.

Do you think debt investments will start getting higher priority compared to equity?

Equity as an asset class has beaten all other asset classes historically, be it debt, gold or real estate, and will continue to outperform in the future.

Equity exposure by Indians is unsustainably low and I expect it to catch up significantly, going forward.

Where do you think Nifty will be in the next two years?

I am not a technical guy, but Nifty at 8,000 looks like a rational bottom. If you adjust for inflation, the market is still at least 15 per cent below the January 2008 levels.

This is without considering the progress companies have made in the last eight years. I would be surprised if the Nifty doesn't go to 12,000-13,000 in two-three years.

Which sectors are you bullish on?

From a stock-picking point of view, I am bullish on every sector, given the structure and dynamism of the Indian economy. I am a bottom-up stock picker and a value investor.

One should look at beaten-down sectors with curable negatives; companies with decent balance sheet and quality assets which can survive the operating challenges. Infrastructure stocks can be multi-baggers once the hurdles are crossed.

What is your investment philosophy?

I am a pure value investor in Indian equities and don’t believe in the word investment philosophy. Simple common sense and wisdom works better than philosophy when it comes to investing.

Who is your favourite investment guru?

Chandrakanth Sampath, who is no more.

I learnt a lot from him in the initial days of my career.

(This article was published on May 22, 2016)

One only needs common sense to make money in stock market: Porinju Veliyath

http://economictimes.indiatimes.com/markets/stocks/news/one-only-needs-common-sense-to-make-money-in-stock-market-porinju-veliyath-equity-intelligence/articleshow/50475099.cms

One only needs common sense to make money in stock market: Porinju Veliyath, Equity Intelligence

By Shailesh Menon & Nishanth Vasudevan, ET Bureau | 7 Jan, 2016, 06.19AM IST

MUMBAI: A popular theme in Malayalam cinema in the 80s was one where the protagonist aimlessly boarded a train from Kerala to Mumbai for a living and made it big in the country's financial capital. Kochi-based investor Porinju Veliyath's rags to riches journey probably has all the makings of such a blockbuster of that decade.

From being a phone operator in erstwhile Cochin to one of the most influential small-cap stock pickers in the country today, Veliyath, 53, has indeed come a long way though his recent ascent has been pockmarked with criticism about the quality of his stock pickings. Some of his more recent top picks are Shreyas Shipping, Jubilant Industries, TCI, NIIT, Force Motors and Alpa Labs. The total value of his share holdings is not known as he holds more than 1% in very few companies. 

In addition to managing his own money, Veliyath handles client funds of close to Rs 400 crore through his firm Equity Intelligence. Among his other small-cap holdings are FCEL, Unitech, KRBL, Selan Exploration, Samtex Fashion, Simran Farms, Accel Transmatic, Stylam Industries, IZMO, Eastern Treads and BDH Industries. Most of these companies would not pass muster with large institutional investors. Nevertheless, these stocks have jumped multi-fold amid the mid- and small-cap frenzy in the last couple of years.

In the most recent case of Alpa Labs, shares more than quadrupled in less than three months since early September after news of Veliyath's interest in the stock got out. Another of his picks, NIIT, has more than doubled in six months since early June. These winners have helped him gain a fan following on Dalal Street. ET caught up with Veliyath in a five-star hotel in Mumbai's financial hub Bandra Kurla complex in November. After hesitating to talk about his personal life initially, Veliyath opened up about his college days, early years in the profession and his investment philosophy. His hunger to make it big was partly because of an underprivileged childhood. 

At the age of 16, it dawned on Veliyath that his family did not have enough money to fund his higher education. The home they were staying in till then had to be sold to repay the debts. Soon, Veliyath shifted to Ernakulam, Kerala's biggest city, to hunt for a job to support his family and also fund his education. 

He started as an accountant in a private firm at Rs 1,000 per month and then at Ernakulam Telephone Exchange as a phone operator drawing Rs 2,500. "I had to start working right from my teens...It was not easy. We were homeless when I started working," he said.

"Those were tough days." To save on rentals, Veliyath enrolled for the law programme at Ernakulam Law College, which offered cheap accommodation and canteen to its students. The next five years were spent studying law and routing trunk calls for the Kochi elite. After graduating in 1990, and not immediately finding any gainful employment back home, he boarded the steam engine-drawn Jayanthi Janata, a popular train for Keralites till mid-90s, for Mumbai with dreams of getting rich. Upon reaching the city, an acquaintance of Veliyath found him a job with Kotak Securities, initially as an office clerk and later as a floor trader. 

Before hitting the trading floors, Veliyath changed his name to Francis. "Porinju was difficult for marketpeople to remember; so I used the English equivalent of Porinju, which is Francis," he guffaws. Veliyath stayed in Mumbai only for nine years. But, by then, he had learnt the ropes of the trade — mainly badla — from the best in market those days. The biggest lesson that Veliyath had learnt in his stint in Mumbai was that one only needs "common sense" to make money in stocks. 

In 1999, Veliyath moved back to Kerala because he was unhappy with the quality of life in Mumbai. Soon after shifting base to Kochi, he made his first investment, mopping up as much as 8% stake in Geojit Financial Services. Geojit was trading in single-digits those days and the whole firm was valued at around Rs 2.5 crore then. "I told (CJ) George (founder of Geojit) then, his company would trade at Rs 1,000 in a few years but he simply laughed it off," Veliyath said. "The decision to buy Geojit was fairly a simple one; here you have a dividend paying company having capital market exposure, clean management and no debt — all for grabs at just about Rs 3 crore. It was an easy decision," he said. 

The stock may not have touched Rs 1,000 but Geojit touched a high of Rs 280.65 in September 2006, helping him make big money in the investment. BNP Paribas acquired 34.5% stake in Geojit in 2007. This was the beginning of some larger fortunes to be made from the stock market. Armed with the newlyacquired wealth, Veliyath bought back the land his family sold decades ago to repay debt and built a luxurious farmhouse on it. Veliyath claims his investment portfolio has generated 33% compounded gains every year since 2003.

This could not be verified independently as portfolio advisors are not required to officially declare comparative returns. Veliyath's investment philosophy is far from conventional. He does not base his strategy on financial ratios or business cycles; on the contrary, it defies various established investment parameters. Many stocks in his portfolio are illiquid, while some of them do not make sense to orthodox stock pickers. His recent interest in some small-cap real estate companies have raised eyebrows.

"I feel there's price for everything. If a company is doing well and has good future prospects, ethics and corporate governance should not come in the way of your investments," said Veliyath, defending his investment strategy. "I don't keep any market cap limits nor do I believe there's value in buying big companies at obscene valuations," he said. "Illiquidity in a stock is fine by me. In fact, only because it's illiquid, these stocks have not grown in value," he added. Detractors dismiss Veliyath as a rash stock-picker with 'little regard for quality'.

The more acrimonious ones simply feel he is in cahoots with friendly promoters. "I don't befriend management for insider information," Veliyath said. "I buy lesser-known, high quality businesses to derive maximum portfolio value. I don't shy away from smaller companies like other 'knowledgeable people' do." Veliyath quips as an afterthought: "I don't buy a lot of great companies with clean balance sheet, honest management and clear business visibility. If you invest in such companies, even bank FDs would beat your portfolio returns."