The life of Ram Bhawnani could be defined as an example of the American dream in the world of business. Born in the small villageofHyderabad-Sind, which is now in Pakistan, he transformed himself from a poor refugee into one of the most influential investors in Spain. In this article, he talks with Universia-Knowledge at Wharton about his career and his business philosophy.


The end of British colonization in India meant that the family of Ram Bhawnani had to leave for the Western Indian region of Maharashtra as refugees after his native village, Hyderabad-Sind, fell under the flag of Pakistan. Bhawnani was then four years old. In his new home, he attended St. Vincent ’s High School, a Jesuit institution, where he always stood out as a good student. “But when I was 17, I had to abandon my studies. At that time, mothers put us to work at a very young age because there wasn’t enough money to eat,” recalls the now-wealthy investor, whose personal fortune is calculated at 250 million euros.


To achieve that, Bhawnani has had to travel a long road. First, there was Hong Kong , where he worked at a textile plant, which was the property of the man who became his father-in-law. Although it was his first job, Bhawnani quickly won the trust of his superiors, who asked him to take over a small bazaar, Casa Kishoo, which they owned in Tenerife ,Spain. “The business wasn’t going very well and they sent me there to try to build it up,” Bhawnani recalls.


It was 1965, and it didn’t take long for the young businessman to meet the expectations set for him. “Sales began to improve, little by little,” recalls Bhawnani, who married the daughter of the owner four years later. Still, Bhawnani’s true vocation was not in the world of business but in finance. His mild, observant character and his instinct for investing led him to realize that Spain was about to undergo spectacular changes over the next few years.


“After the death of (the dictator, Francisco) Franco, on November 20, 1975 , I thought that the country was going to experience a great economic takeoff. It was then that I began to get interested in the stock market and, at the beginning of the 1980s, I made my first moves. In 1983, I invested 120,000 euros in shares of Banco Popular,” he says. Twenty years later, Bhawnani has control of 0.5% of Popular, the third-largest Spanish bank; 0.9% of Banco Santander Central Hispano, the top-ranked bank; 10.4% of Banco Zaragozano, where he was also an board member; and, for the last four months, about 7% of Bankinter, one of the most important mid-size institutions in the country.


Moreover, along with his family, he owns nine hotels in Santa Cruz de Tenerife , and another hotel in Las Palmas on Grand Canary Island, where he shares ownership with ONO, the telephone operating firm, and Kalyani Simcav, an investment firm.  “I have always [used] loans, which I asked as much for the business as for investing in the stock market,” explains Bhawnani, who, despite having spent nearly 40 years in Spain, speaks with a marked foreign accent.


A Banking Man

When you ask Bhawnani what has been the secret of his success in the stock market, he answers, “Nothing special. What I’ve done has been to use what newspapers publish as my guide and to invest in solid companies. I imagine, also, that I have had a bit of luck.” Frugal in speech, Bhawnani can never figure out why others expect so much of him as a person. “I continue to be myself. I go everywhere as I have always done, and I continue working in Casa Kishoo. I don’t have a driver or a large office. I prefer to do the same things that I have done until now, and so when I die I will be in peace, because I will have fulfilled my conscience.”


Bhawnani practices the Hindu religion and defines himself as “a man of deep religious convictions. Every night, after work, I go to the temple. On Saturdays, I go three times. I enjoy praying very much, and reading religious texts. I am also a very big fan of biographies of saints and of great historical figures such as Gandhi.” It is this peaceful, humane spirit that he tries to bring to his professional life. “I have always given work to anyone who asks me and who looks like he wants to work,” explains Bhawnani. “It breaks my heart to see small boats [with illegal immigrants] who arrive at the Canaries every day coming from Africa.”


The press is another one of Bhawnani’s great hobbies. “When it comes time to invest, I have guided myself by what the newspapers say. I also read Expansion, (Spain’s leading daily newspaper for business information), as well as the Financial Times and El País for general information,” he explains.


When it comes time to invest in the stock market, Bhawnani has also been guided by the trust put in him by people at those companies where he has invested his money. His first great move was Banco Central Hispano (which has now merged with the Santander). “I remember that when the Banco de España took over Banesto – at the time one of the foremost Spanish institutions – shares in the Central Hispano fell a great deal, and the managing director, Angel Corcóstegui, met with his shareholders in a hotel in Tenerife to explain the situation to us. He surprised me by coming up to me, greeting me, and telling me the exact number of shares that he owned. It was then that I realized that I could trust him.”


It was 1994. His vote of confidence, along with the gradual recovery of the institution, allowed Bhawnani to rack up capital gains of 30 million euros four years later. His next goal was Banco Zaragozano, managed by Felipe Echevarría. “I always trusted him,” recalls Bhawnani. “To me, he seemed like a man who was honest, simple and charismatic.” Those three qualities convinced him to wind up buying 10.4% of the [bank’s] capital. Nevertheless, his enemies were certain that Bhawnani’s interest in Zaragozano represented more of a calculated stock market strategy, and the possibility was always rumored that some big bank could decide to launch a hostile takeover bid.


Moreover, Alberto Cortina and Alberto Alcocer, the co-presidents of that institution who owned 40% of the business, were being tried in court for fraud and the falsification of documents, endangering the future of the company. Last year, they were convicted and were forced to leave their posts at Zaragozano. After their sentencing, rumors quickly flew that they were going to sell their ownership, as they eventually did in May 2002. Barclays, the British firm, launched a takeover offer for 100% of the capital, which the two Albertos [Cortina and Alcocer] agreed to, along with Bhawnani and his 40%.


At the moment, that deal is now the most profitable deal in the story of the trader. He received 120 million euros, making capital gains of 70 million euros. Nevertheless, Bhawnani has some bad memories of his passage through Zaragozano. The [two] Albertos revealed their reluctance to reappoint him to the bank’s board, despite the fact that he controlled 10% of the capital. Moreover, on one occasion Bhawnani accused the duo of not telling about the most important topics [of discussion] at the bank; above all, when the takeover offer was being drawn up. “When I bought more than 8%, they told me not to continue acquiring [shares],” notes Bhawnani. He finds only one explanation for this position: “I imagine that they did not want to lose a majority.”


The sale of Zaragozano meant that the trader had to seek a new goal. This time, online banking was his choice. Four months ago, he reported to the CNMV (Spain’s National Stock Market Commission) that he had acquired five percent of Bankinter’s shares. At present, his total ownership has reached about seven percent. At first, there was speculation that Bhawnani was going to continue buying until he reached 10%, but he notes that “our only priority was to get five percent in order to maintain a stable ownership. We are not in a rush to acquire more.”


Bhawnani always speaks in the plural, and he stresses that he doesn’t work alone. “The assets belong to the 20 members of the family – from my mother-in-law to my four sons. We are all informed about everything, and we all give our opinions about investments that we have to make.” Those investments have almost always been limited to the world of banking “because the Banco de España stands behind them and controls them. My approach is: If I don’t control the situation, at least I know that there is someone behind me who will do that.”


Credits and Little Risk

Far from being a financial kamikaze, Bhawnani prefers to bet on the sure thing. “My portfolio is divided between fixed income, which represents about 75%, and variable income, which is the other 25%. Moreover, I never buy shares in sectors where I have a presence. For example, I never work with telecommunication [shares] because I already control ownership in ONO. That allows me to diversify risk.” One area where he always maintains shares is in the Banco Santander Central Hispano. “I never have less than a million and a half, or two million shares. And I always continue working with Popular,” Bhawnani acknowledges.


The fact that he always asks for credit to operate in the stock market confers a conservative character on the trader. “I then have to give the credit back so I don’t like to take risks. I prefer to invest in solid sectors, little by little, and to diversify risk.” Moreover, Bhawnani doesn’t consider himself a shark in the marketplace, but someone who sees himself as a businessman who “looks for stable ownership. I am interested in dividends because that way I can reinvest that money in the business.” This tendency goes against new currents in the stock market, which are less and less concerned about dividends, and consider that winning on the stock exchange floor involves making the price of a share rise, and then selling it.


“I understand that lots of people don’t want dividends, so that they can avoid paying taxes, but I am a businessman and my priorities are in the business.” His concern for maintaining stable ownership [in companies] where he makes his investments is in line with this approach. It is the same reason that he moved quickly to acquire five percent of Bankinter. That [level of] ownership opened the door for him to join the board of directors and allowed him decision-making power and control over the company.


“We still haven’t talked about when I will join the board,” says Bhawnani. He is referring to Jaime Echegoyen, managing director of Bankinter, and Juan Arena de la Mora, its president. But Bhawnani doesn’t seem worried about this because he is sure that it won’t be long before they make him the offer.


“Around here, they are more intelligent (than at the Zaragozano), and they want the owners to control the company,” he asserts. “I don’t believe in everything that they say about good governance and corporate social responsibility. What I believe in is the obligation of companies to make money in an honorable way, and not exploit workers.”


Bhawnani offers this criticism: “In the business world, things would run better if people were simpler.” Seated in a corner of Casa Kishoo, his office includes an old wooden table, a computer where he controls his progress on the stock market, and a television screen that shows how foreign exchange rates are moving. Two telephones, one fixed and one mobile, complete this peculiar office, where he spends hours talking with his stock brokers and following minute-by-minute share movements. “The important thing is to work,” he says, “and to do it in an honorable way.”