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Starting with a mind-boggling $2 billion exit from Bharti Airtel, history of Warburg Pincus’s investment in India goes back to the very origins of private equity play in India


Over time, Warburg’s pace of investment has increased with over $1billion deployment in the past couple of years and its assets under management have quadrupled over the past 20 years. Chip Kaye and Joe Landy, co-CEOs of Warburg, spoke exclusively with Indulal PM and Arijit Barman. Edited excerpts…


What are the changes you have seen in the private equity landscape? How has it evolved over the past few years


Chip Kaye (CK) : Our senior management group comes here every few years which demonstrates our commitment to India; this year is somewhat special as we are celebrating our 20th anniversary of investing in India


The history of Warburg Pincus here goes back to the very origins of private equity in India and we have benefitted from a front row seat as the market has evolved


Is it still wait-and-watch, or is it an inflection point


CK: We have invested a substantial amount of money in India over a long time. We invested more money in India than any other private equity firm. We are not macro forecasters and actually spend little time on macro forecasts, worrying about the political and economic questions of the day


Joe Landy (JL): What is amazing is the depth of talent that we continue to see. The next generation of entrepreneurs are much more talented and limitless in terms of what’s possible -- it is fascinating for us to see the broad base of entrepreneurs in India. India has continued to be one of the most important markets for us in the world


Warburg started the PE craze in India with Bharti? What’s your experience like here


JL: This is one of the most prolific regions we invest across the firm. Warburg Pincus has represented approximately, 4 per centof private equity money in India over the last 20 years and 10 per centof distributions that have gone back


That represent, an extremely successful market for us. Fully exited portfolio companies have been some of the most successful private equity investments in India such as Bharti, Alliance Tires, Havells, Piramal, MAX, Kotak, WNS. Some of the firm’s most successful investments have been made in India


CK: When we first came to India in the early 90s, it had its own unique capital economic development through independence to the crisis of 1999 and the beginning of reforms


One of the legacy issue was very high interest rates. Financial assets were traded cheaply. Twenty years ago, capital was very scarce and entrepreneurs had to make careful use of capital


A lot of the early investments we made were buying stakes in well managed companies with high integrity. But in the 2000s, with the big run-up in the markets, India had some sort of unmatched expectations, especially during the last years of the previous administration. I think over the last few years, under PM Modi, there has been some sort of reenergized excitement


From an investment point of view, we are seeing a much broader calibre of entrepreneurs. The calibre of people, in that sense, has always been impressive


JL: Across all the sectors we participate in, we are really participating in the growth of the economy. Finding the right management and right investment themes is critical for us


We are fully focused on growth, and do not have a controlled/leveraged mentality but have a growth, partnership building mentality. India is a place to respect to people — not only the time when people and businesses are flourishing, but also in difficult times


Our broad areas of focus span retail, financial services and inclusion, export services, logistics, internet/technology and telecommunications through to energy. However, over time, our strategy has remained consistent


Our approach has always been flexible, covering both minority and majority investments and startups through to more mature companies


Also Read: Warburg aims for $8 billion investments in 10 years in India


What are negatives and areas to improve


CK: There are, of course, a number of legacy issues requiring attention, such as land and labour. Inability to access land at a reasonable price continues to be a constraint on development of a lot of businesses. Implementation is the next big issue. India has a strong society and institutions, but implementation continues to be a challenge


JL: We see all this as an opportunity. Perfect markets are not necessarily ideal places where you can get fantastic returns. By working through challenges, we have found and will continue to find great opportunities


CK: So some of the biggest issues are domestic in nature. The challenges are well known to the Indian political community and the natural order of politics will address them over the course of time. Its ability to do so as a nation will determine what the state looks like in the next 10-20 yea


Warburg Pincus has already deployed $4 billion among 50-odd companies. Will you reach double that number in probably half the time


CK: We never believe in numerical targets and do not have set investment allocations by region. But frankly, if we couldn’t deploy more than double that amount during half the time, I would say, all of us will be disappointed


India is at an interesting inflection point and is a very compelling investment destination for us. Our pace of investments in the country has increased. We have invested over $1bn in the last couple of years. Our assets under management in India have quadrupled over the last 20 years


As deal sizes get bigger, would you focus more on buyouts or control trade


CK: Warburg Pincus is a growth investor, growth is in our DNA. We are agnostic to as to whether we do start-ups, minority or majority investments or buyouts


JL: We think about the thesis in various sectors in which we invest. We have a very different thesis for energy investments, healthcare, energy, etc. Alliance Tires was a great build-out story


You can probably argue that it was a buyout, but for us, it was a growth partnership. As deal sizes and leverage increase, we will continue invest but it will be growth-focused


How has quality of entrepreneurs changed compared with other emerging markets


CK: We would rank them on the highest scale. The entrepreneurial talent in India is one of the deep attractions of the Indian market. I believe a key factor has been our consistent strategy of partnering with outstanding management teams and entrepreneurs to build companies


The capability of entrepreneurs in India to navigate difficult situations is what differentiates them. This pool of entrepreneurial talent is now broadening into many new areas and sectors, which is what makes it more fascinating


Where will the next great deal come from, consumer/internet space? Do you think this is going to throw up the next world class entrepreneur…like a Sunil Mittal


CK: We see great deals coming not just from the consumer and internet space. I think there are a couple of categories such as data revolution led by companies like Quikr and CarTrade, and logistics with companies like Rivigo with enormous potential and a very fascinating model, or Stellar with another revolutionary approach. Healthcare and the Bio-IT spaces are very interesting too. And, of course, we have a huge unbanked population


What sectors interest you most


CK: Continued financial inclusion and penetration of financial products is a play on the underlying economy. The migration from unorganised to organized/branded products and services offers is very interesting with huge potential


The emergence of the digital economy has been exciting to discover. The building out of infrastructure and development of logistics continue to be an interesting theme. Finally, we’re also taking a new look at oil and gas and giving a lot of thought to energy and power as well.


Source:Economic Times

Moody’s Investors Service and its Indian affiliate ICRA Ltd on Monday said the country’s growth of gross value added (GVA) at basic prices will ease to about 6.6% in 2017 from around 7% in 2016, with a likely pick-up in the second half of the calendar year, as the economy adjusts after demonetisation


India’s economic growth is likely to decelerate to 7.1% in 2016-17 from 7.6% the previous year, chiefly due to an industrial slowdown, the statistics department said earlier this month, sidestepping the possible impact of demonetisation


The comparable measure of economic activity with Moody’s projection—GVA at basic prices—showed the economy growing 7% in 2016-17, compared with 7.2% last year


“Even after the currency in circulation is replenished, we expect that India’s economic growth will stabilize with a lag, while remaining strong,” said Aditi Nayar, an ICRA principal economist. “The adjustment and recovery period could stretch to as much as 2-3 quarters for certain sectors.


Moody’s and ICRA pointed out that after a temporary dampening effect on consumption and investment in the medium term, demonetisation will likely strengthen India’s institutional framework—by reducing tax avoidance and corruption—and should support efficiency gains through greater formalisation of economic and financial activity


ICRA also said that the loss of incomes in some sectors and deferral of consumption are likely to weigh on capacity utilisation, delaying the capacity expansion plans of the private sector. “And, the extent of capital spending budgeted by the central and state governments for the fiscal year ending 31 March 2018 will affect the extent to which infrastructure spending can stimulate growth in a non-inflationary manner,” Moody’s said


“Nevertheless, economic and institutional reforms already introduced and potentially forthcoming, continue to offer a reasonable expectation that India’s growth will outperform that of its similarly rated peers over the medium term, and that the country will achieve further improvements in its macroeconomic and institutional profile,” William Foster, a Moody’s vice-president and senior credit officer said


ICRA said that the focus on digital transactions and the introduction of a goods and services tax (GST) will likely reduce the competitiveness of the unorganized sector. ICRA, therefore, anticipates a relatively healthier expansion of the organised sectors in 2017, at the cost of the unorganized sectors


ICRA further pointed out that low agricultural growth in H1 2016, as well as healthy reservoir levels on a seasonally adjusted basis, will support the pace of expansion of agricultural output in the first half of 2017. “But agricultural growth in subsequent quarters will be influenced by various factors, the most important being the magnitude and dispersion of monsoon rainfall,” Moody’s said in a statement


Moody’s also said that in an environment of lacklustre global trade, and with economies globally facing the increasing risk of protectionism, India’s very large domestic markets provide a relative competitive advantage when compared to smaller and more trade-reliant economies


On the fiscal front, Moody’s said that the government will likely remain committed to achieving its fiscal deficit target of 3.5% of the gross domestic product (GDP) for the fiscal year ending 31 March 2017. However, room to reduce the deficit further to the target of 3.0% of GDP in the following year will be limited, due to the need for increased infrastructure spending and higher government salaries


On the issue of average CPI (consumer price index) inflation, ICRA said that the rate will soften to 4.5% in 2017 from 4.9% in 2016, although the readings will continue to register month-to-month volatility. Key factors that will dominate CPI inflation in 2017 include monsoon dynamics, the impact of GST on prices of various goods and services, commodity price movements and the rupee-dollar exchange rate.



Mumbai: Cisco chairman and United States India Business Council (USIBC) chief John Chambers expects foreign direct investment (FDI) from the United States to rev up once President-elect Donald Trump and PM Narendra Modi get down to working together. Chambers said he personally as well as Cisco were doubling down on the faith that India would lead GDP growth as well as the digitisation momentum globally


"The initial dialogue between the two leaders (Trump and Modi) went off very well and both sides are fully engaged now," Chambers told TOI, while adding that the American companies have committed to bring $27 billion FDI in the next two years. "I have interacted with several top leaders. Modi is among the three smartest leaders I have met," he said, arguing that the Indian PM was revamping the country's image as a slow follower, tepid innovator and not a risk taker


Chambers declined to name the other two leaders he admired, adding with a full-throated laugh "it would land me in trouble"


He said Modi was putting forth a pro-growth agenda and a win-win situation for Indo-US relations, which he said would become the most important not in the region but in the entire world. "There's a natural alignment and it's almost as if the two countries can sense each other. I think Mr Trump is going to be a good president. Both nations are in the midst of dramatic changes and it's important for us not to overreact to specific developments but on the eventual outcomes," he said, adding that any negative effects of the demonetisation move would be a temporary bump


Chambers said Trump has to address the fact that politics in the US was out of touch with people for while, and has to focus on creating 25-35 million jobs in the next four years, which "I think is doable". The business sentiments are positive and stock markets have recovered to all-time highs, he noted.


Source:Times of India

The fastest growing major economy in the world, India, has also become a popular destination in the Asia-Pacific region for expat entrepreneurs to set up a business, according to a survey. “India is a popular destination for expat entrepreneurs. More than one in 10 (11 per cent) expats in the country moved here to set up a business, more than twice the average of 5 per cent across Asia-Pacific,” according to HSBC’s ‘Expat Explorer Survey’


The survey also revealed that India draws more expat entrepreneurs than countries in the Middle East, such as Bahrain (7 per cent) and the UAE (5 per cent). The 2016 Expat Explorer survey was conducted among 26,871 expats in over 100 countries through an online questionnaire in March, April and May 2016


In comparison to other countries in the region, India also has the highest proportion of expats on an international secondment or assignment, it said. A third (33 per cent) of expats in India have been relocated to the country by their employer, more than in regional financial hubs such as Hong Kong (26 per cent) and Singapore (22 per cent), and above the Asia-Pacific average of 17 per cent, it added


Nearly two-thirds (64 per cent) of expats are confident of the Indian economy, above the expat average of 52 per cent across Asia-Pacific, it said. More than half (53 per cent) of expats in India also have confidence in the political stability of the country, above the regional average of 48 per cent.Expats in India are able to save more, with 44 per cent saying that living here have accelerated their progress towards making long-term savings and investments, compared with 39 per cent across the region


The average annual expat income in India is USD 145,057 as compared to the global average of USD 97,419, it said. “The survey shows that many Asian expats work abroad primarily to improve earnings, career prospects and quality of life. Some move overseas to study and take up a new challenge,” HSBC’s Head – Retail Banking and Wealth Management, India, S Ramakrishnan said.


Source:The Financial Express

The government is considering a proposal to increase foreign direct investment (FDI) limit in print media sector to 49 per cent from 26 per cent at present. Currently, the FDI policy permits 26 per cent foreign direct investment in the publishing of newspapers and periodicals dealing with news and current affairs through government approval route. According to sources, the government has started a consultation process on the matter with an aim to attract more foreign funds in the sector


Last year, the government relaxed FDI norms in several sectors, including civil aviation, defence, private security agencies, pharmaceuticals and food processing industry. During 2015-16, foreign direct investment (FDI) in the country increased by 29 per cent to USD 40 billion, from USD 30.93 billion in the previous fiscal


Foreign investments are considered crucial for India, which needs around USD 1 trillion for overhauling its infrastructure sector such as ports, airports and highways to boost growth. Foreign investments will help improve the country’s balance of payments situation and strengthen the rupee value against other global currencies, especially the US dollar.


Source:India News