Cautious Optimism On India With Grand Trunk Capital, Apollo Global And Sony

Apr 30 2014, 9:17pm CDT | by

Cautious Optimism On India With Grand Trunk Capital, Apollo Global And Sony
Photo Credit: Forbes Business

Sanjay Patel of Apollo Global Management summarized investors’ experiences in India over the course of this century as a cyclical experience of “euphoria and despair.” With national election results to be officially announced May 16th, there is cautious optimism that the Bharatiya Janata Party (BJP) and its leader Narendra Modi will be announced as significant enough election victors to avoid political gridlock while executing necessary reforms and infrastructure development. At the Milken Institute Global Conference in Beverly Hills, a panel of investment experts provided their forward-looking insights.

Mr. Patel is head of Apollo Global Management’s Europe unit as well as leading Apollo’s private equity investment portfolio in India. Mr. Patel who has participated on the same panel at the Milken Institute Global Conference for several years noted, “our room has been shrinking” indicative of lessening interest in Indian investment. He acknowledged economic data from recent years has been poor but sees nothing that cannot be fixed and turned around. Apollo Group has been ramping up their investment in India for the previous 12 months and believes the government paralysis that has stymied the government in recent years may linger enough into the next administration to provide a longer window of good opportunity.

Sam Gupta is CEO and CIO of Grand Trunk Capital Management, an India focused investment vehicle. Previous to Grand Trunk, in partnership with Soros Fund Management, he was the founder and portfolio manager of QIF Management that invested more than $2.5 billion in India. Mr. Gupta sees the recent election as transformative to India with 450 million of 850 million voters under 35, “the intensity of expectations is higher than seen before.” Mr. Gupta emphasized that the youth voting block that wants better infrastructure and better jobs is more unified than before by the digital revolution of Twitter and other social platforms. He sees the young people crossing racial, religious, age and caste differences to unify around issues they all support.

Man Jit Singh is president of Sony Pictures Home Entertainment. While today he manages the worldwide home entertainment division, he previously was CEO of Multi Screen Media, the operating company for Sony Pictures Television’s TV networks in India that he continues to serve as non-executive chairman. Mr. Singh emphasized the record of Mr. Modi in the Gujarat State where he was Chief Minister from 2001 to 2012: “the hope is that Mr. Modi has developed infrastructure in the state he comes from.” Gujarat is “visibly different than other parts of India” and there is now optimism that he can do the same for all of India.

The key issues to unlock India’s promise of economic development all centered in discussions around excessive bureaucracy, lacking infrastructure and a need for political resolve. Regarding where investment opportunities are in the market today:

  • Mr. Patel sees the expansion of credit markets and lending businesses as opportune places to be to take advantage of economic and infrastructure expansion. He also notes that in the global low interest rate environment that exists today, investors can find good yields of 9% to 18% in India.
  • Mr. Gupta has three themes he sees to invest in: digitization, finance and infrastructure. The digitization is a natural development with a youthful population and technology expanding. Regarding finance, “if anything happens in India, the financial system must be a part.” And, infrastructure is potentially the biggest opportunity though it will take time to ramp up projects.
  • Mr. Singh following along the lines of digitization leans toward investment in the entertainment industry. He notes with an average age of 26, the young growing population of India will only have an expanding interest in entertainment while TV has “only 60% penetrated in India” to-date.

There are many broader opportunities in India if the new government can succeed in reforms. Mr. Singh noted only 10% of GDP is from exports, something that can clearly grow. Mr. Gupta brought up that food waste is currently at about 50% in a country that is the world leader at producing fruits and vegetables; a clear space for innovation and development that could change both India and the world’s food markets. Mr. Patel voiced a sentiment echoed by the others that Mr. Modi may be the least corrupt Prime Minister India has had since Prime Minister Nehru left office in 1964. All this in mind, it is a time for cautious optimism for India’s development as the results of the elections and the actions of the future government are awaited.

The complete one hour panel discussion is below.

 
 

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