“I wish startups would focus more on a business model that produces cash rather than taking money at $2 billion, $3 billion in valuation. That is not the capital that will build great companies in the world. So, capital is not very important, it’s your business model,” Jhunjhunwala said
The investor of Ace Rakesh Jhunjhunwala died at the age of 62 in Mumbai on August 14. He was often called the Warren Buffet of India. He is known for the similarities in investing patterns shared with the investor of a veteran American. Similarities as well as cautions, extended to cryptocurrencies as well as new-age startups cash-guzzling.
Jhunjhunwala’s net worth was more than $5.5 billion. As India mourns the death of this legend of Dalal Street, the person who had immense faith in the growth story of India. In this blog, let’s take a look at why this Big Bull of the stocks market stayed away from the new-age startups and cryptocurrencies.
Know The Importance of Positive Cash Flow
Jhunjhunwala echoed the comments of Buffet regarding the importance of positive cash flows for organizations in various media interactions. In an interview earlier, Jhunjhunwala said that the price across the globe was like a “slave of cash flow and earnings”.
“Without so much focus on valuations, a company needs opportunity, frugality, corporate governance, technology, the ability to change and if the race is on, it is the tortoise that wins, not the hare,” Jhunjhunwala told to media in another interaction with media.
Jhunjhunwala’s portfolio is worth nearly Rs 32,000 crore, and that is barely invested in the new-age startups.
He stayed away from the public offerings of multi-million dollars (IPOs) of unicorns such as Policybazaar, Paytm, Zomato, and Nykaa despite the bullish digitization drive in India.
“I don’t want to go to the startup party as the hangover is only for two days,” Jhunjhunwala had said.
Jhunjhunwala also said that he was expecting further downside in current shares of new-age startups that are already trading with multi-month lows.
In another interaction with the media, he said, “I tell all my investee companies that I am not interested in valuations. I am interested in businesses that will scale. I am making a business model and a cash flow model that businesses have to follow. Valuations cannot be more important than my business model and sustainability.”
What did He say On Cryptocurrencies?
As he had reservations about the models of high cash-burning business, Jhunjhunwala had some misgivings about the cryptocurrency as well.
Jhunjhunwala also said that the daily volatility in cryptocurrency is something that keeps him away so that he would not buy bitcoin for $5 dollars.
“In the world, it is only the sovereign that has the right to print currency. Tomorrow people will produce five lakh bitcoins. And which currency fluctuates 5 percent in a day? A currency fluctuating 10 percent a day, can it be a currency?” Jhunjhunwala said in an interview.
“If the dollar goes up by 1 percent, it becomes news and here you have a currency that fluctuates 10-15 percent every day. I think it is just speculation of the highest round and I am not going to buy it, even if it goes up, I don’t want to join the party in town, I think the hangover will be even worse,” Jhunjhunwala also added.
The investor class of cryptocurrencies and equities is completely varied from each other. Cryptocurrency will collapse one day, as he was saying in another interview.
As there is no control on cryptocurrency’s supply, there is no control over the value of cryptocurrency, he also added.