From IIT To ₹60,000 Cr AUM, How Nitin Jain Became An Investment Visionary
In a recent conversation on the Simple Hai! podcast, Nitin Jain, Chairman of Neo Group, shared his remarkable journey through India's stock market and his vision for the nation's financial future. Jain, who now manages an impressive Rs 60,000 crore in Assets Under Management (AUM), offered host Vivek Law a compelling narrative from his teenage years to becoming a CEO at just 30, and now a successful entrepreneur.
Genesis of an Investment Journey
Jain's foray into the stock market began not with pocket money, but with stocks gifted by his father during his teenage years. This early exposure sparked a lifelong interest in a family tradition of market engagement. While at IIT Kharagpur as an 18-year-old, he found it perplexing how the value of a stock could fluctuate daily, unlike other goods. This inherent volatility fascinated him, leading to an early, albeit simplistic, hypothesis: "if its price moves up and down every day, then if you buy low and sell high, you will make money". This curiosity laid the foundation for his deep understanding of how stock markets operate.
The Dot-Com Bubble's Sting
Jain openly admitted to significant mistakes in his formative years, which he now views as invaluable lessons. During the IT bull market around 1999-2000, he applied his "buy low" strategy to stocks that had seen a 95 percent correction, falling from Rs 1,000 to Rs 502. His logic was simple: if a Rs 1,000 stock was now Rs 50, it could easily double to Rs 100, providing a quick profit. However, the stocks plummeted further to Rs 25, and eventually, he witnessed them turn to zero.
Desperate to understand how a company could become worthless, he even travelled to Bor, where he believed one of the company's headquarters was located. To his dismay, he found only a small, locked office with the company's name and locals confirming no one ever visited. This experience delivered a "massive lesson": "if something is cheap, it does not mean it is worth buying; if something is expensive, it does not mean it needs to be sold". Instead, he learned that if a company's price is rising in a long-term, sustainable way, something genuinely good is happening within the company. He cited companies like Asian Paints, Hindustan Lever and HDFC Bank as examples of those that have grown consistently for decades because of their strong underlying performance. This cemented his understanding of the profound relationship between a company's health and its stock price.
Embracing Volatility
Jain observed that a common mistake, even among seasoned investors, is the tendency to buy when prices are high and panic-sell during corrections. He, however, views volatility as an advantage. While good companies may see sales and profits grow consistently, stock markets don't move in a linear fashion. They are influenced by human behaviour, driven by "greed or fear". Mastering these emotions is key to leveraging market fluctuations, he told Law.
He pointed to recent market behaviour, noting that after reaching an all-time high six months prior, mid-cap and small-cap stocks corrected by 25-30 percent, with some even falling by 60-70 percent. This, he explained, presents an opportunity to identify companies with strong earnings growth and low debt, suggesting that investors should buy during every correction because India is poised for a "massive bull run" over the next 15-20 years.
India's Unprecedented Bull Market
Jain’s conviction in India's economic trajectory is unwavering. He highlighted the phenomenal growth of the Nifty and Sensex over the past 20-25 years, yet believes this is just the beginning. He underlined India's demographic advantage: an average age of 28 years and an ambitious, hardworking population. He envisioned that individuals currently earning Rs 2.5 lakh annually would see significant income growth by the time they reach 40. This demographic dividend, coupled with ambition and skill, forms the "foundation for the massive bull run which is yet to come", he believes.
Pioneering Alternative Investments
Jain discussed Neo Group's strategic focus on Alternative Investment Funds (AIFs), particularly in infrastructure. Globally, infrastructure is a vast asset class, with 40 percent owned by asset managers. He pointed out the peculiar trend of India selling its best infrastructure assets to global entities, despite the country's massive infrastructure needs which exceed government budget capabilities.
Neo Group's approach involves acquiring already-built roads, avoiding the risks of construction. These roads typically offer guaranteed annuity cash flows from NHAI for 25 years. The mechanics of their investment are compelling: for a Rs 300 crore road asset, they deploy Rs 100 crore of their own capital and leverage Rs 200 crore from banks. This structure yields a project-level Internal Rate of Return (IRR) of 10.5-11 percent. However, due to the leveraging and the spread between the asset's yield and borrowing costs, Neo Group secures a locked-in return of 15-16 percent from a "triple A asset" (NHAI being the counterparty for 15 years). Jain considers this "one of the best risk-adjusted returns in the country"9.
Looking ahead, Jain plans to aggregate these road assets into Special Purpose Vehicles (SPVs) and then convert them into InvITs (Infrastructure Investment Trusts). This allows smaller retail investors to participate. The strategy capitalizes on the spread between the 15.5-16 percent portfolio yield and the 10.5-11 percent expected return of InvITs in the stock market, potentially boosting actual returns for AIF investors to 20-22 percent. He expects these high returns to normalise as more players enter the market, which he welcomes to meet India's vast capital requirements.
Vision for Global Recognition
Jain concluded the conversation by expressing his fervent desire to build a large, respected financial institution in India. His ultimate ambition is to see an Indian-based financial services company achieve global recognition, a feat he believes would be a moment of immense pride for the country.
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