GRILLED QUESTIONS WITH CHEESE AND EXTRA BUTTER… ANYONE?

By Ruma Dubey

This happens to us so many times. We have bought a stock and when you purchased it, you obviously were convinced it is the best stock to own. But over a period of time, you see that the numbers are slipping. At that time, you have so many questions in your mind but do you ever think of going to the AGM and questioning the management about the reason for the mishaps in the performance?

But that is what Rakesh Jhujhunwala has started doing off late. Maybe he did it earlier too but we surely have started hearing about it only now. The ace investor is now in the news for “grilling” the management.

He first began to notice his questions with Titan Industries and it was then that we knew as one of the large investors, he most certainly had the right to do that and he was doing it so well, almost like he has developed a panache for this “grilling.”

This not done during the AGM; being one of the value investors, he participates in the conference call after the earnings. In Titan, post the Q4 numbers, he has questioned the management about the unpredictability of the watch division, asking them why there were such wild fluctuations in the earnings. He criticized the management about their margins and questioned when the watch and eye units will start double-digit growth as four years have been invested in them while the business should mature in 5-6 years.

Then we heard about Jhunjhunwala grilling the management of Indigo, asking them what they were doing to cushion themselves against the fluctuating fuel costs. He also asked, “how were the yields in April and how do you anticipate the yield for the quarter and the year?” He does not stop at just these two questions, they were just like an opener; he asks questions as the management answers.

Today’s news is that he has grilled the management of Lupin. The company declared a dismal set of Q4FY17 numbers and Jnhunjhunwala asked pertinent questions about price erosion and falling margins. He also questioned the management about Lupin’s strategic tie-up with a Polish biopharmaceutical company, Celon Pharma.

Prior to all these, in August’16, we probably heard for the first time that Jhunjhunwala actually does something like this. It was with the management of Aurobindo Pharma. He had asked the management about initiatives being taken by the company and why they were not yielding results.

Even after the Q3FY17 numbers, Jhunjhunwala had grilled none other than the management of Tata Motors when the company had declared a 96% drop in consolidated net profit.  He asked the management about its hedging policies as the fall in the pound sterling had led to a sizeable forex loss.  He asked the CFO, ““An extra fall in the pound, you hedge for the next eight quarters on a sliding basis at a rate of around 140 or 160 or whatever the pound was. In the second quarter, the hedge was about 60 per cent, which could have been hedged at the higher rate. In the current quarter, 50 per cent will be a hedge at a higher rate. Am I right?” 

This precedent of “grilling” is such a good one to follow. If you are an investor, even when not as big as Jhunjhunwala, you have every right to question the management when it goofs up. If we as shareholders and not institutional investors start exerting our right, won’t the pressure build on the management to take better decisions?

We all as shareholders, should attend the AGM and EGMs, not remain mute spectators or ask inane questions about tea and snacks post the meetings. When we do not agree with the management or find that they are doing something which is not right, we should develop the habit of questioning them.

We want to emulate Jhunjhunwala’s investing style so why not this good habit too?