The ace investor often called India’s Warren Buffet, first invested in Concord in 2004 and later helped the company’s founder in buying back the company from pharma major Mylan in 2009.
Despite being invested in the company for close to two decades, Jhunjunwala’s investment firm RARE Enterprises is not selling any shares in the Concord IPO and in fact, plans to continue to hold on to the shares for long as it feels that its investment can compound further, said Rajiv Agarwal, who oversees listed and private strategic investments of the firm.
The ₹1,551-crore IPO, which was subscribed two times, values the 24% shareholding of Jhunjunwala family trusts at ₹1,867 crore. In 2009, RARE invested approximately ₹49 crore in the company.
“I see this business growing strongly and consistently for the next few years and it makes eminent sense for us to stay invested in a growth company that can compound for a long time,” said Agarwal.
“Investors are always on the lookout for businesses that can scale up profitably and after an inflection point do not need significant external capital to fund growth as they can do it internally. During our investing experience, we have realised that you need to back the right business model run by a passionate and execution-focused management team to reach that scale and inflexion point, which is easier said than done,” he said. “I can say with confidence that Concord is one such business. We believe that Concord has reached a decent scale and given the long runway for growth it can continue to grow in a capital-efficient manner.”
Despite being a growth company, Concord generates healthy cash flows to both fund capex as well as reward investors with regular dividends, he added.Two Decades
Jhunjhunwala first invested in Concord in 2004 and in 2006, he sold most of his stake to Matrix Laboratories which was later acquired by Mylan, retaining approximately 7% stake. However, Mylan and Concord were not on the same page regarding its product pipeline and in 2009 Jhunjunwala helped Concord founder Sudhir Vaid buy out Mylan’s stake.
“We felt that Sudhir Vaid’s expertise in fermentation technology and ability to set up fermentation plants cost-effectively was a massive edge, which gave us confidence. This is a specialist business and skills are hard to come by,” said Agarwal.
A graduate in chemical engineering from the Institute of Technology, Banaras Hindu University, Agarwal joined RARE Enterprises in 2006 from consulting firm Accenture. At RARE, he has invested across B2B and B2C businesses spanning consumer, education, mobile entertainment, media and financial services.
RARE, which has investments in several private companies, is currently focusing on taking these companies public, as they mature. It manages a portfolio of around $6 billion, across public markets and private investments.
“For our private companies, we are pursuing the strategic plan decided along with Rakeshji while he was there. At this point our focus is that as the companies mature, we figure out a way to list them. Some will take time to scale up revenues and profits,” said Agarwal.
“We believe that companies should go public when they have profit visibility of at least ₹100 crore so that they can attract good institutional investors,” he added.
RARE Enterprises’ private investment philosophy has evolved over the years from backing small promoter-run companies to investing in scaled-up companies with strong management teams.
In 2021, RARE, along with Multiples and CPPIB bought out Zydus Cadila’s animal health business for ₹2,921 crore. Earlier in 2018, Jhunjunwala had acquired Star Health for around ₹6,500 crore in a consortium with Westbridge Capital and others.
“We invest in businesses which have a very large addressable opportunity and are run by passionate management teams who are focused on growth with good return ratios. Earlier we were investing in smaller companies, recently we have been investing in larger businesses with deeper talent pools. Smaller companies need a lot of handholding. In bigger companies the elements of scale are already in place which is when our growth capital becomes a catalyst to drive further growth,” said Agarwal.
Commenting on the emerging investment landscape, Agarwal said that he sees massive investment opportunities in sectors where the government is focusing on making the country self-reliant as well as infrastructure and energy transition.
“The government has been focused on making India self-reliant in defence, investing in infrastructure sector – roads, power, renewable power, digital Infrastructure, railways and ensuring energy security. All these will lead to massive opportunities for investment in a host of different companies that will enable government agenda,” he said.