Five hours in, and I’m beginning to understand the warnings: an evening on the town with Rakesh Jhunjhunwala is not to be taken lightly. A night that began over a $450 bottle of whisky, on the 15th floor terrace outside his office in the heart of downtown Mumbai, has wound on to a local watering hole, and now to a favourite Chinese restaurant nearby. I am much the worse for wear. He is just warming up.
Often known as “India’s Warren Buffett”, Jhunjhunwala is a colourful financier with outspoken views to match his stock market acumen. He says he started investing with just $100 of start-up capital. Now he has $1.25bn, according to the latest Forbes rankings, the first to join India’s growing band of billionaires by working the markets alone. He cuts an outsize figure too. This is partly physical: Jhunjhunwala is a large man, with a rotund face and a protruding stomach that gives his white shirt a tent-like appearance; his bulky diamond ring is sufficiently sizeable to distract from the many cigarettes he smokes. “I only manage my own money, not for anyone else,” he tells me as the night gets going, a generous glass of Johnnie Walker Blue in hand. “I like my freedom, boss. I don’t want to be answerable to anyone. F*** ’em. That is why I can say what I want.”
Even more than this plain-speaking, however, Jhunjhunwala has won recognition for his relentlessly upbeat views about Indian growth. Known as the “big bull”, he made his fortune spotting undervalued companies which went on to prosper as the country’s economy leapt forward over the past decade. “The factors that drive India’s growth,” he says, “are irreversible – the democracy, the demographics, the entrepreneurship. Much more is going to come in the future.”
It was these investments that in turn propelled the 52-year-old investor from a modest middle-class background into his nation’s burgeoning billionaires club. Ten years ago this group was not yet half-a-dozen strong; today it has grown to 61, with a combined worth of $250bn, which on some measures places India second only to Russia among major economies for concentration of wealth among its very richest citizens.
This is the story of modern India, one in which huge fortunes are amassed as the country’s old system of soggy socialism and international isolation is overturned, and sectors from banking and media to telecoms and financial markets are transformed by international investment and increased competition. As a result, growth rates rose ever-higher, coming within a whisker of 10 per cent in 2010 and prompting talk that India might soon roar past China to become the world’s fastest-growing major economy.
But it is a story with a darker side too. Some of those who prospered in this heady moment, including Jhunjhunwala himself, made money with their reputations intact. But others rose less cleanly, building fortunes off the back of their country’s lethargic but graft-ridden political system – part of the reason why the country’s growth has flagged badly over the last year. And it is this second group, the beneficiaries of a nexus between India’s government and its tycoon class, that lead many to worry that an era of crony capitalism is now undermining the country’s hopes for future growth and development.
“It really is a remarkable change, which has happened mostly over the last 10 years or so,” says Ashutosh Varshney, an academic at Brown University who has compared contemporary India to America’s “Gilded Age”, the late 19th-century era of robber barons and rapacious industrial capitalism. “Any economy that grows as quickly as India’s has is bound to generate enormous human temptations. These very rich people have started buying politics, and the great churning in India you see against corruption is essentially about the purchase of politics by the wealthy.”
So who are India’s new business elite, and what do they think about the wealth amassed by their peers? I decided to meet a handful of them, as part of my attempt to answer a more simple question: is this extraordinary rise in the power of the hyper-rich harming their country?
I step into Rakesh Jhunjhunwala’s office on a sweaty October evening, just after the end of the monsoon rains, to find him parked behind his desk, watching data whizz by on five computer terminals. He seems glued to the screens, stopping only occasionally to grab the phone and bark “buy” or “sell” instructions in Hindi. I can make out only the amounts, which appear to involve millions of dollars.
The terrace outside provides a pleasing view over India’s financial capital, with glimpses between the nearby tower blocks to Malabar Hill, the elite neighbourhood over the bay where Jhunjhunwala lives with his wife and three young children. A little further to the north stands Antilia, the 27-storey home of Mukesh Ambani, India’s richest man. This grandiose building, completed in 2010, came to symbolise the excesses of India at that time: a residence that probably cost more than $500m, standing atop a city more than half of whose residents live in slums.
Yet while Ambani inherited the basis of his fortune, a trait he shares with most of his fellow billionaires, Jhunjhunwala came from more modest beginnings. “The Ambanis and all these big industrial houses, they are empire builders. They have inherited legacies. I inherited no legacy,” he tells me. Instead he picked up an early interest in stocks from his father, a minor government official who talked about markets with friends in the evening, over a drink. “I was a very, very curious child,” he says, and a teenage interest in markets soon led him to become a full-time trader and investor. “It was the Wild West,” he says of Dalal Street in the early 1980s, the equivalent of Wall Street in a city still then known as Bombay. “But I always thought India would shed its socialism, and if there were new temples in India, they would be its stock markets.”
A few glasses later, I ask about his approach to investing, and am given an early taste of his ribald sense of humour. “Markets are like women,” he says: “Always commanding, always mysterious, always uncertain, always volatile, always exciting!” He then asks me to turn off my recorder before launching into a bawdy (and clearly frequently repeated) soliloquy on why markets are also like sex, which I pledge not to repeat.
The prior line was one I’d actually heard him use before, during a bravura, finger-jabbing performance at a conference the previous week, when he conducted a screaming argument with a fellow panellist, and won laughs for claiming that Mumbai would never succeed as a global financial centre until it had better strip-bars and nightclubs. This is the flamboyant side to his character: one confirmed by the Bentley he keeps at home, the private jet he says he plans to buy, and the 50th birthday party for which he flew more than 200 friends to Mauritius.
Yet a capacity to shock and a taste for luxury aside, it was Jhunjhunwala’s eye for equity market bargains that truly brought him to prominence, and in particular his predictions of a boom at the start of the last decade. In 2002, he wrote an article arguing India was “at the threshold of a secular and structural bull market”, as government reforms bore fruit. “I am shouting at the top of my voice in 2003,” he recalls, as we move on towards dinner. “Buy, buy, buy! Sell your bloody wife’s jewellery, and buy!’”
It was a prescient call. India’s markets went on a five-year tear, and a number of the companies in which he invested rose in value many times over. The country flourished too, with a jump in growth rates buoyed by a flood of international money and record corporate profits – and the list of dollar billionaires grew ever more crowded, Jhunjhunwala now among them.
Other fast-growing emerging markets have witnessed comparable expansions among their wealthiest citizens, of course. Yet beyond the rise in the number of billionaires and the absolute size of their riches, India’s boom was also remarkable for the sharp rise in the share of the country’s wealth this tiny group held – a fact confirmed in research by Michael Walton of Harvard University and Aditi Gandhi of Delhi’s Centre for Policy Research. Their analysis shows a striking increase in these holdings, relative to the size of the economy. In 2003, the billionaires’ share stood at just 1.8 per cent; five years later it had ballooned to 22 per cent. Much of this flowed from the rocketing stock market, which bumped up the equity the tycoons held in their own companies. This in turn explains why the figure has since fallen back in the aftermath of the global financial crisis, to around 10 per cent.
Even so, some of those who prospered during India’s great opening up say such increases in wealth are not a special cause for concern. Take B.K. Modi, a charismatic industrialist who also often turns up in Forbes’ rich lists, who made his fortune by tying up with western companies like Xerox, as they sought entry into India’s fast-growing markets.
“There was always this affluent lifestyle in India,” he tells me, sitting in his plush and recently refurbished residence overlooking Mumbai’s exclusive Juhu beach, wearing his usual straw-coloured hat. “It is not something especially new. Some people say business people have become the new Maharajas,” he says. “But if someone has created wealth through growing share value, that is accepted as OK.”
This is a sentiment I also hear from Subhash Chandra, the head of ZeeTV, which 20 years ago opened up as India’s first satellite television station, kicking off a raucous media revolution in a country that, until then, had just one stodgy government-backed station. Over the next two decades, Chandra has become arguably his country’s most prominent media tycoon. He is now also its 23rd richest man, worth $2.9bn.
“Our country has come through 400 or 500 years of slavery, right from the Moguls to the Portuguese, then to the British,” he tells me in his office in midtown Mumbai. He’s dressed in a sharp suit, with a distinctive, elegant stripe of white hair above his forehead. “Our people were suppressed for maybe 800 years. That is changing.”
Others see the last decade as a less positive period, where wealth has become increasingly bound up with another of the country’s most vexing problems: corruption. One is Rajeev Chandrasekhar, a former technology entrepreneur. In 2005 he sold BPL Mobile, his telecoms business, for Rs44bn ($817m), taking his own place in the upper echelons of India’s monied class, before moving into politics as an independent member of the country’s upper house of parliament.
“Until roughly the year 2000, becoming a billionaire was something that everybody saw as a good thing in India. They saw it as a coming of age,” he explains, as we sit in his home in a fancy neighbourhood of New Delhi. “Now being wealthy has been given a bad name.”
The generation that rose in the period immediately after India’s reforms in the early 1990s amassed fortunes in areas such as information technology and outsourcing, he contends. However, recent times have seen a more troubling economic trend. “In the last decade, almost all of the billionaires created in India have been created because of the proximity to politics,” he says. “They have been created in specific areas where government policy determines whether you make a billion or you don’t, which includes land, real estate, infrastructure, and natural resources.”
It is a claim at least partially backed up by Walton and Gandhi’s research, which found that nearly half of India’s billionaires have made their money in sectors that the duo describe as “rent-thick” – ie where profit is dependent on “economic rents” for access to scarce resources, such as land or the telecoms spectrum, which are typically only available via government permissions. Such sectors can be lucrative, but they also often provide a Petri dish for corruption.
“I don’t come from the school of thought that creating a business is bad, or that having a jet is bad, or that having a Lamborghini is bad,” Chandrasekhar says. “I have a Lambo, I have a jet. I enjoy all of that.” But he suggests that India’s trend towards cronyism is worsening, and that it has taken an even more malevolent turn of late, as politicians find ways not just to extract money from the wealthy proprietors of businesses, but also to become such themselves.
“We have a completely unique phenomenon in India, which I call political entrepreneurship, that has taken root in the last five to six years,” he says. “They [the politicians] are saying: ‘We don’t want briefcases full of cash and Swiss bank accounts and all that any more. We want to own businesses ourselves. We want equity stakes.’ ”
The result is a cadre of Indian politicians who are thought to have quietly amassed gigantic fortunes by helping companies they themselves own, either directly or indirectly through their families or associates. A small number, Chandrasekhar hints, would take their place on Forbes’ billionaires list, had they not cleverly disguised the true extent of their gains.
Such claims cast a shadow over India’s economic rise. The country has become more prosperous over the last decade. Its elite has become much richer, and is set to become wealthier still. A recent report from Kotak, a Mumbai-based brokerage, suggested that some 62,000 Indians had a net worth of at least Rs250m ($4.6m) last year, and that group is set to grow more than threefold by 2015.
But the nation has become less equal too, and the benefits of growth seem to have flowed disproportionately to those at the very, very top. It is a development that leads some to issue stark warnings. “If you don’t make sure that the wealth is distributed to a wider group of people, if you are amassing the wealth to yourself more and more, I’m telling you, a day will come when people will take you out from your houses, and throw you out,” says ZeeTV’s Chandra.
Others are more phlegmatic, believing that public anger will ultimately force a response from the political system. “Democracy is being corrupted and subverted in India,” says Brown University’s Varshney. “But democracy has a way of self-correcting, just as it did in a similar period in America more than a century ago.”
As my evening with Jhunjhunwala comes to an end, he offers me a lift home and I flop unsteadily into the back of his Mercedes, while he ponders the same issue. The business empires, the industrial conglomerates and inherited family dynasties that dominate his country’s business landscape will decline in time, he says after some thought. He goes on to cite an old Hindu saying, that wealth will always peter out by the time it reaches the seventh generation. For himself, he says he avoids such troubles simply by steering clear of politics.
“I have no dealings with the government. I haven’t taken any licences, I don’t own any coal mines, I have no politicians as friends, I never go to a government office.” And last year he also announced plans to give a quarter of his fortune to charity, a move inspired by the investor to whom, in India at least, he is so frequently compared – Warren Buffett, who has cajoled many of the world’s wealthiest into handing out more of their money.
“Maybe I’ll make it half, who knows?” he says. In the meantime, his ambition remains the same. “I want to earn the greatest wealth in the world, but with the greatest practical integrity.” It is an ambition that many of his countrymen might wish others like him would share.
James Crabtree is the FT’s Mumbai correspondent