Consistency and perseverance in your work are considered a benchmark of success.
While for others, it is typically described as a path of successes and disappointments, but for Radhakishan Damani, it’s a bit different.
Mr. Damani experienced losses on several of his ventures. Still, he learned from them and changed his strategy to his advantage. Being a skilled observer and listener throughout his journey increased his stature as a businessperson and an investor.
About RK Damani
Radhakrishnan Damani was born into a Marwari family, one of India’s powerful economic groups. He left college early and began working as a stockbroker at a young age on Dalal Street.
However, he quickly began to purchase stocks after realizing that he should start investing himself to make real money. Soon, with the help of his trading strategies and investments in multi-bagger stocks, he began to turn his investment into profits.
Investing philosophy of RK Damani
Damani became the largest individual shareholder when the HDFC Bank went public in 1995.
“You can’t remain on Peddar Road (one of Mumbai’s priciest locations) at Dharavi’s (Mumbai’s largest slum) costs,” he said in response to a question about why he invested here when he had other options available at lower valuations.
In Damani’s portfolio, HDFC eventually rose to the top of the multibagger stocks.
He frequently sparred with Harshad Mehta as a trader, generally leaning toward the bearish side. When Harshad was trying to play with the market, Damani used to wager on the opposing side. Eventually, when the Harshad Mehta Scam was discovered in 1992, the market plummeted, and Damani made enormous profits.
In his 20s, he was still a novice in the broking industry, so rather than engaging in trading, he preferred to study stock market strategies speculatively.
He registered with SEBI at 32 years old and made his first investment. As a result of his trading success, he quickly understood that he could make money by investing in MNCs. However, he didn’t always succeed and did experience some losses along the way. But he also grew as a result of them.
The growth, cash flows, and predictability of the company were examined by RD using his bullish avatar.
His statement, “Everything I learned in life is by investing,” gives us a good idea of that.
He acquired a 5,000-square-foot Apna Bazaar franchise in Nerul and another in Navi Mumbai in 1999, when retail was still a little world in India, along with Damodar Mall. Apna Bazaar was founded and taken over by D-Mart two years later.
From Investing to building business
After changing his work direction, he went from being an investor to becoming a retailer.
However, he did not tread on the conventional method!
Instead, he concentrated more on opening shops close to people’s homes than opening shops in shopping centers. He attempted to provide value for money while satisfying most daily customer needs.
D-Mart has a straightforward business plan:
- They pay less for the products by buying them in large quantities and then offering the same for less money without undercutting.
- As a seasoned investor, Damani had a thorough understanding of the market, which enabled him to keep investors’ sentiments toward the company optimistic. His greatest asset was the way he interacted with the vendors.
For instance, D-Mart modified the FMCG industry’s standard payment schedule, which was 12 to 21 days, so that payment was made to the vendor on the 11th day. This ensured good payment terms.
About his investments
Some of his most significant investments are 3M India, GE Capital Transportation Industries, VST Industries, BF Utilities, Sundaram Finance, Mangalam Organics, Spencers Retail, CRISIL, Simplex Infrastructure and ICRA, among others.
Besides that, Radhakishan Damani invested for the first time in the defense companies, including Astra Microwave Products, the Kalyani Group company BF Utilities, with a 1.3 percent stake, and Mangalam Organics, with a 2.17 percent stake, all during the quarter that concluded in June 2020.
To increase his wealth, he made decisions based on the state of the market. He gradually developed into a long-term investor and focused most of his investments on companies with solid fundamentals.
Further, he adhered to the philosophy of purchasing high-quality equities at bargain prices and holding them for five to ten years, thus taking advantage of market opportunities to generate substantial profits.
Rakesh Jhunjhunwala generated profits using the same short-selling strategy.
Damani valued his clients, suppliers, and partners in business. His DMart outlets adhere to the same tenet and concentrate on offering inexpensive goods at attractive prices.
To ensure that he receives supplies at a cheap cost and sells them at a reduced price, he prefers to pay his suppliers and merchants within a day in most cases. The fact that his stores never run out of goods is just one factor.
Apart from that, he preferred to simply watch and observe other market participants in his early years and learn from them. Manu Manek, the most active market participant then, used specific stock market strategies and understood his process of investing.
When the stock market of well-known investor Harshad Mehta was being manipulated in the 1990s, he gained money by short selling, selling first, and purchasing afterward.
Damani could recognize the market’s pulse and make decisions in line with it. He began short selling after Harshad Mehta substantially invested bank funds in stock purchases and increased their value.
Mehta purchased ACC stock, which rose from 200 to 9000, but the company’s fundamentals did not support the increases. As the market valuations skyrocketed then, Damani also suffered a few losses.
However, he started short-selling those specific stocks on which Harshad Mehta was making significant investments after realizing that he was manipulating the market. He did this since he knew the stocks would decline. And when the SEBI revealed the Harshad Mehta scam in 1992, he made a tidy profit, thus increasing his personal worth.
Entry to Value Investing
After a few years of investment, Mr. Chandra Kant Sampat, a value investor, encouraged him to do value investing. Sampat had already made a great fortune with the help of value investing. To make long-term investments, Damani subsequently began to practice value investing.
Moreover, he purchased bottom-out equities with excellent fundamentals at lower prices and held them for a long time to generate gains; two examples are GATI and TCI.
When all the PSU banks were doing well in the 1990s, he invested in HDFC Bank in 1995, predicting that “Dharavi will remain Dharavi and Peddar Road will be Peddar Road, just wait and see.”
He purchased numerous shares of VST Industries for Rs. 85 in 2000. Today the stock is worth more than Rs. 3600. He also invested in Blue Dart, Sundaram Finance, Gillette, India Cement, GATI, and a few other companies, reaping enormous rewards over the course of five to ten years.
Investing in high-quality companies at a discount rate and keeping them for a long time allowed Mr. Damani to generate significant profits.
Investment lessons to learn from RK Damani
A successful person can be distinguished from the crowd by his planning. Some renowned businesspeople and investors come to mind when we talk about strategy.
The retail king of India, Mr. Radhakishan Damani, is one example who discovered the stock market and rose to prominence as a long-term investor.
1 Keep the focus on the Long term
Value investment was one of RK Damani’s primary investing principles. As an investor, his main goal was to purchase undervalued equities with a solid chance of turning a profit over the long term.
He kept the same philosophy when he became an entrepreneur.
Whenever he wanted to open a store, he always bought the land instead of leasing it. D-mart eventually makes significant rental cost savings thanks to it.
To understand the trading world, you must possess the necessary analytical abilities, information, and foresight, just like Damani. Successful traders are always willing to take risks and experience losses. They don’t just rush into the world of trading and hope for the best.
2 Take small steps to make it Big
Damani took his time to open himself. His command over the supply chain was improved as a result. Damani maintained his vendor-friendly reputation and concentrated on profitability by keeping it on a small scale.
Consequently, D-mart has been profitable every year in its nearly two decades of operation.
If you want to do something, you must have the enthusiasm and patience to go after it.
He focused on an emotional aspect that talks about the importance of having patience even when situations are not going well.
Compared to the stores controlled by Ambani and Biyani, D-Mart, launched 16 years ago, only has 119 locations across a few states.
Damani chose a leisurely pace, allowing him to concentrate on profitability rather than rapid growth. For this reason, D-Mart has not closed a single location since it commenced its operations, and it brings in more money per location than anyone does.
4 Keep a clean slate
Unlike most of his rival businesses, Damani always pays its suppliers in full, in contrast to the industry standard of 30 to 40 days of credit. Within two to three days, he usually pays his vendors.
It enabled him to get to know his vendors and suppliers and maintain strong relations with them. That’s why stocks in the store are never low.
5 Ignore herd sentiments
He initially adopted well-liked financial methods when he invested in Dalal Street. He acknowledged that when he abandoned herd instinct and stuck to his plan, he began to gain money.
Therefore, he began concentrating on locating stocks with long-term profit potential.
When he became a businessman, he stuck to the same approach. Unlike his competitors, he expanded gradually, and the brands available in his outlets are limited. Damani avoided opening shops within malls, which allowed him to save a lot of money and provide goods at lower prices.
6 Capture local interest
Damani built a reliable chain of distributors and retailers.
His understated approach to operations has enabled him to continue turning a profit. It is evident from the fact that D-mart hasn’t shut down a single location since its founding in 2002.
7 Buy low and sell cheap
Offering customers everyday use consumer goods at steep prices was something Damani was well-versed in. In contrast to the industry standard of weeks, one of his strategies was to pay his vendors and suppliers within days.
They supply the goods at a lower price in lieu of early payment. The cost savings were passed on to his clients, ensuring a steady business flow.
8 No frills
Damani was aware that the goal of his business was to offer consumer goods at reduced costs. Without expending unnecessary effort, he accomplished his goal.
His shops are plainly decorated and carry a small selection of merchandise. Low pricing is the only draw for visitors.
His physical appearance reflects this quality as well. He simply wears a white shirt and pants, earning him the nickname “Mr. White and White.”
9 Let your work speak for you
Damani maintains a low profile, allowing him to give his whole attention to his work. His quiet ascent in a down economy is a testament to his unwavering dedication to his job.
For instance, rarely has he given an interview to a newspaper or TV station.
10 Simplicity is the key
He operates on a straightforward company model, supplying FMCG products to customers at lower prices without expending much effort on posh location and decor.
Customers are fond of visiting D-mart to get discounted products.
He highlighted the “importance of compounding” in a young investor’s portfolio, saying that the key to compounding is to start early and invest wisely.
He says, “The market teaches us something new every day, but the one lesson that stands out is the ‘importance of compounding’ in a young investor’s portfolio”.
In addition, he stresses the importance of choosing long-term relationships with outstanding companies.
“The most important lesson learned over the course of thirty years is the significance of comprehending compounding; if you do, then you’ve won a significant portion of the fight for financial freedom,” according to Damani.
“The first lesson is that someone is sitting in the shade now because someone planted a tree many years ago,” he responded when asked what his biggest takeaway from a bear market was.
No one can overlook RK Damani’s name when listing the names of successful Indians. Although he keeps a very modest profile, his ascent to success as an entrepreneur has been pretty remarkable.
It is very clear from the fact that he is one of the select few self-made millionaires who started with nothing and rose to fame with dedication, determination, and foresight.
The example of RK Damani’s life demonstrates the value of seeing value early on and making investments while keeping the big picture in mind.
Thinking critically is more important in the stock market than the hit-and-miss approach. RK Damani is one of the many great businessmen and investors who have grown by making mistakes and applying the lessons he learned to succeed even more.
Damani opted to pursue the stock market, although he didn’t have a good experience in his academics. But he followed his passion and built a lucrative career after seeing the market’s potential.
You must possess the necessary analytical abilities, information, and foresight to succeed in the trading world, much like Damani.
Lastly, successful traders are always ready to take risks and deal with any losses and don’t just plunge into the world of trading just on their stars.