Mohnish Pabrai Raises Stake in This Smallcap Investment Banking Firm

The stock market is home to captivating tales, such as the story of a mere Rs 10,000 investment in Wipro ballooning to 8 billion (bn) or an investment of 100,000 in HDFC Bank in 1995, now worth 80 million (m)! However, finding such lucrative stocks is no easy feat.

To reap sizable profits from the equity market, one must possess substantial skill and adeptly leverage their knowledge to identify top-notch stocks capable of generating exponential returns.

Thus, many investors seek the portfolio of renowned investing experts who have a track record of outperforming the market and a talent for spotting multibagger stocks.

As a result, every move these investing gurus make, including their decisions to buy or sell stakes in specific companies, garners significant market attention.

For investors seeking such news, there is noteworthy stock market news: Mohnish Pabrai, an ace investor, has acquired a substantial number of shares in an underperforming finance company.

Who is Mohnish Pabrai?

Mohnish Pabrai is a seasoned investor and the managing partner of the Pabrai Investment Funds.

His investment preference includes low-risk high stocks in a well-established business with minimal downside and sound management.

As per the latest corporate shareholdings filed, Mohnish Pabrai publicly holds three stocks with a net worth of over Rs 11.2 bn.

For a more detailed view of his portfolio, check out Mohnish Pabrai Portfolio: Top 3 stocks.

Which stock did Mohnish Pabrai bet on and why?

According to the latest shareholding pattern of Edelweiss Financial Services, Mohnish Pabrai added 0.2% more exposure to the company in the March 2023 quarter.

He now holds a 6.95% stake in the company or 65 m shares of the total equity, against 6.72% in December 2022 quarter.

He initially bought a 1.15% stake in the company in March 2019.

Here's how Pabrai 's holding in Edelweiss Financial Services has varied since March 2019.

Quarter Ending	No of Shares	stake (%)
Mar-19	1,07,52,000	1.15
Jun-19	1,07,52,000	1.15
Sep-19	1,27,24,000	1.36
Dec-19	1,04,30,793	1.12
Mar-20	1,31,06,000	1.40
Jun-20	1,31,06,000	1.40
Sep-20	3,84,05,159	4.11
Dec-20	6,13,74,866	6.56
Mar-21	5,61,31,124	6.00
Jun-21	4,57,89,000	4.89
Sep-21	5,87,03,028	6.26
Dec-21	6,06,06,000	6.43
Mar-22	6,06,06,000	6.43
Jun-22	6,06,06,000	6.43
Sep-22	6,06,06,000	6.43
Dec-22	6,33,79,028	6.72
Mar-23	6,55,37,763	6.95

Data Source: BSE

The value of his stake came down drastically when NBFC stocks sank like stones during the IL&FS liquidity crisis in 2019.

After his investment in the company, the shares have eroded over 60% of their value.

While we don't know why he has increased his stake in the company, here are some explanations.

#1 Strong financial performance

For the December 2022 quarter, the company reported a 32.1% YoY rise in revenue to Rs 21.2 bn. This was against the revenue of Rs 16 bn a year back.

While the net profit also rose 42.7% YoY to Rs 1 bn from Rs 709 m in the same quarter last year.

Its asset management business experienced significant growth in assets under management (AUM) and profitability.

Over the past three years, the company has tripled its mutual fund AUM to Rs 1 trillion (tn), representing the second-highest growth rate in the industry this year.

Additionally, its retail folios have quadrupled, while the Systematic Investment Plan (SIP) book has nearly tripled, aiding the predictability of income and the annuity nature of their business.

Edelweiss' market-dominant alternatives platform has seen a stellar 209% YoY growth in net profit driven by a robust 50% YoY growth in AUM and 34% YoY growth in fee-paying AUM.

The firm's general insurance business has experienced a YoY growth of 55% in gross direct premium income (GDPI) and continues to leverage technology to enhance product offerings.

Additionally, the Life Insurance business continues to be one of the fastest-growing businesses in the industry, outpacing industry benchmarks.

#2 Strategic expansion plan

The company launched its first Infrastructure Investment Trust (InvITs) with an asset under management (AUM) of Rs 23 bn to strengthen its market position.

Additionally, the company has signed definitive agreements to acquire road and transmission assets from L&T. This strategic move further bolsters its position as a market leader in the infrastructure investment space.

Going forward, the company plans to remain committed to its asset-light model in retail credit. This involves continuing to utilize their successful co-lending relationships and strengthening them even further.

The company is confident in the growth potential of this business model and aims to scale it up in the forthcoming years.

How shares of Edelweiss Financial Services have performed recently

Over the last one month, the share price of Edelweiss Financial Services has gained 6%. In 2023 so far, the stock is trading lower by 11%.

While, in the past one year, shares are trading lower by 9%.

The company touched its 52-week high of Rs 77.4 on 18 January 2023 and its 52-week low of Rs 49.4 on 20 June 2022.

About Edelweiss Financial Services

Edelweiss Financial Services is one of India's fastest growing integrated investment banking companies.

The conglomerate offers a diverse range of financial products and services to a varied client base, including individuals, institutions, and corporations.

The company's offerings span numerous asset classes and consumer segments, both in domestic and global markets, supported by a research-driven approach and a track record of innovation that has helped establish strong client relationships.

The group operates in several sectors, including NBFC, Housing Finance, Asset Management, and many more.

In partnership with PAG, the company also operates an associate business, Nuvama Wealth Management.

With an extensive network of sub-brokers and authorised persons, the Edelweiss group maintains a presence in all major cities in India.

To know more, check out Edelweiss Financial company fact sheet and quarterly results.

For a sector overview, read our finance sector report.

you can also compare company with its peers:

Edelweiss Financial Services vs Bajaj Finance

Edelweiss Financial Services vs Muthoot Finance

CEO of Equitymaster Rahul Goel talks to Mohnish Pabrai about investing in stocks that makes no sense, in the latest Investor Hour Podcast.

Popularly recognized as a disciple of Warren Buffett and Charlie Munger, Mohnish Pabrai has a knack for picking multibagger stocks...across the world.

Based out of the US, Mohnish has had great success in buying stocks following his simple approach - buy stocks that are selling so cheap that it almost makes no sense at all.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...