Rakesh Jhunjhunwala says Zomato a ‘tulip mania’, says cashflow an area of concern

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Ace investor Rakesh Jhunjhunwala sees ‘tulip mania’ building in the stock market. It is his way of analyisng the buzz surrounding Zomato’s debut on the bourses. On Zomato hitting Rs 1 lakh crore market capitalisation on its listing day, Jhunjhunwala said it doesn’t matter how much valuations the newly listed firm has earned. “Show me the cash-flow! Zomato received Rs 1 lakh crore market capitalisation yesterday, but when is it getting Rs 3,000 crore of cash-flow? It doesn’t matter how much valuations you get. What is more important is how long the company lasts. The world is giving too much valuations to the digital change. Such valuations are not sustainable, in my view,” he said during a keynote address at an event organised by Equirus.

“It is like a tulip mania and I want to be proved wrong,” he added.

Jhunjhunwala said one-third of his portfolio is invested in unlisted companies.

His belief

“I like the idea of new-age companies and young entrepreneurs. Their attitude and the kind of speed and devotion they work with is unbelievable. But, the race is not ending tomorrow. Who built Zara or Walmart? Understand that capital is not important if you do not have a business model. I look for business model when I invest. Valuations will follow the cash-flow,” he averred.

According to him, it is a matter of concern how people are being swayed by valuations.

“People are too optimistic about how fast these companies will generate cash-flow. These new-age companies are contributing to the world. I admire them. But, the entrepreneurs are being misguided on valuations,” he said.

View on Economy and political leadership

Having earned the moniker ‘Big Bull’ for the bets he has taken, Jhunjhunwala sees double digit growth coming in this year.

“We have all the ingredients of growth. Prime Minister Narendra Modi is a great leader. He is a distant socialist. He is ready to do everything to enhance the size of the cake. The inflection time has come. I could be wrong, but I predict this year we ill have double-digit growth. We will start with 7-7.5% and go to 10%. It is futile to compare America with India. America has 9% corporate profits to gross domestic product. We have it around 3%. We need corporate reforms. The good thing is India has lowest corporate debt and a well-provided banking system,” he opined.