We are pleased to bring you this exclusive interview with Rahul Saraogi, a leading Indian value investor.
Rahul is the founder and managing director of Atyant Capital Advisors, advisor to the Atyant Capital family of funds. In the last 14 years he has focused exclusively on the Indian markets. His mission is to consistently identify the best 10-15 investment ideas from among the thousands of publicly-traded Indian corporations. Rahul’s value-based investment philosophy stands apart due to his belief in the paramount importance of corporate governance, specifically how management operates with its minority shareholders in mind. Rahul is the author of “Investing in India: A Value Investor’s Guide to the Biggest Untapped Opportunity in the World, a definitive guide on navigating the Indian markets published by John Wiley & Sons. Rahul graduated from the Wharton School of the University of Pennsylvania with a Bachelor’s degree in Economics (Finance). Outside of Atyant, he practices Vipassana, a 2,500 year-old meditation technique that helps people see things as they really are. Rahul lives in Chennai, India.
MOI Global: Tell us a little about your background. Did you grow up in India, and what path did you take following your graduation from Wharton?
Rahul Saraogi: I went to high school in India and went to the U.S. for my undergraduate degree. Growing up, I was always fascinated by the U.S., the “land of plenty,” as my father would describe it. I had a strong desire to learn about the U.S. economy, how it functioned and why it was so successful.
In college, I spent a lot of time reading Keynes, Milton Friedman and Friedrich Hayek. I also studied “modern” finance and all the Nobel Prize-winning theories it embodied. The efficient market theory, the capital asset pricing model and the entire concept of measuring risk based on historical volatility seemed retarded to me. In fact, as I have evolved as an investor, I have come to reject the notion that volatility is risk. Volatility becomes risk due to leverage and time horizon mismatches.
I have come to reject the notion that volatility is risk. Volatility becomes risk due to leverage and time horizon mismatches.
I went back to India and worked with my mentor who is a stock market veteran of 25 years. I did not discover Buffett and Graham until graduating from the school of hard knocks. When I went back to India, global stock markets were at the height of the tech mania. I “understood” technology and instantly became the star at the office and among my peers. I traded all kinds of toxic waste and made a lot of money for myself and for clients. However, as Warren Buffett has said, “a long string of impressive numbers multiplied by a single zero always equals zero.” I didn’t meet my zero, but almost got there.
I was very disillusioned for a period and, during that time, I stumbled upon The Making of an American Capitalist by Roger Lowenstein. It completely captivated me. I got ahold of every book about Buffett, Graham and Fisher that I could and read them and re-read them multiple times. The concept of stocks as ownership of a piece of a business appealed to me instantly. The concept of compounding and the importance of preservation of retained capital also resonated well with me.
In 2002, I started Meridian Investments to manage capital for very close friends and family who trusted me. Between 2002 and 2006 we generated a cumulative return of 430% on capital that stayed with us from beginning to end. Meridian was really not a scalable business though because I didn’t know how to raise money. We therefore started the Atyant Capital India Fund in late 2005.
MOI: Help us understand the kind of investor you are, perhaps by highlighting a couple of examples of companies you have invested in or decided to pass up. What are the key criteria you employ when making an investment decision?
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