Where the Rich are Investing 2018

Sanjay Lalbhai

Unperturbed by the vagaries of the stock market, the chairman of Arvind swears by investing in equities

Soumik Kar

Sitting in his luxurious home in Ahmedabad, Sanjay Lalbhai speaks about his love for music even as he gestures toward his high-end music system: “This room is designed to ensure that one gets the best out of music.” The 64-year-old businessman is a man of refined taste — far removed from his business of textiles and branded apparels.

Turn the conversation to money and Lalbhai opens up on the change in his philosophy and approach. “When I was younger, there was no serious thought of setting money aside. There were limited investment options and the concept of a family office did not exist,” says Lalbhai. Over the past decade, the father of two has set up a family office run by professional managers. “The advantage of running a family office is that you have experts tasked with the job of looking at specific asset classes. I do not have to spend my time on this,” explains Lalbhai.

The first priority for Lalbhai is to maintain his lifestyle and that, he thinks, can come from safe debt instruments such as AAA bonds. “These instruments are not prone to fluctuations and the return is adequate enough to maintain my existing lifestyle,” opines Lalbhai. In a good year, not more than 10% allocation goes into fixed income. The third-generation entrepreneur looks at double-digit return, post-tax. Hence, it’s comes as no surprise that most of his wealth is parked in equity, which fetches him 14-15% return.

A small fraction of Lalbhai’s wealth goes towards art, where again he reaches out to advisors, who help him connect with artists. Like most inheritors, Lalbhai has exposure to real estate handed down over generations. “My grandfather always fancied real estate as he believed land was the only product where supply did not go up,” says Lalbhai. Though deals in real estate are minimal, any investment is largely restricted to purchase of land parcels outside the city. “The probability of a price correction is lower in such cases. Also, our approach is that the investment is not for the next gen but the one beyond that,” explains Lalbhai.

The family currently owns 43% stake in the company which enjoys a market cap of over Rs. 80 billion. “The big difference is that, in the past, all the money used to be ploughed back into the business, but now we are looking beyond our business,” smiles Lalbhai. With equities clearly an overwhelming favourite, Lalbhai is not perturbed by the vagaries of the stock market. Given that his own stock, Arvind, has delivered a CAGR of 35% over the past 10 years (as of November 5) against 7% for the Sensex, it’s a phenomenal wealth creation tool that has worked wonders for the textiles mogul.