However, I had not appreciated yet another reason for investing in the country - a growing sense of pride and confidence that home-grown businesses can thrive and compete on the international stage. This is quite different from businesses which operate primarily on the basis of India's low cost wage structure (... and even now some of them are "graduating" to higher value-added products and services).
This post from the Managing Direct of JHS Svendgaard says it all:
Until not too long ago, there was a tendency to look down on everything Indian.
Consumers who went out to buy products generally gravitated towards the international at best and anything that even sounded remotely international at worst.
The general conclusion was that if it is international, then it must be superior; if it was Indian, then it must be mediocre.
The biggest transformation of the last half-decade is a new-found pride in a number of things Indian. ...
Besides, there area number of other developments at play: a growing scale achieved by these Indian companies, the manufacture of products that reconcile world-class standards with relevant customisation ,the growing penetration of these products into rural India, the engagement of home-grown role models to endorse these products and increasing competitiveness. The result is that most of these companies are not merely content to play for incremental market share; through the introduction of innovative products, they are keen to create markets that never existed.
The result of this transformation in national identity and pride is captured in the response of friends to our decision to emerge from the outsourcing shadow of a global multinational. When we announced this decision a few years ago, the first response was ‘How will you survive?’ When I explain our business model today, the reaction has largely changed to ‘Wow! It’s so nice of an Indian company to take on international brands.
The bottom line is that it is increasingly inconceivable that the second most populous consumption market in the world would need to depend on global brands for its everyday needs. On the contrary, the time has come for home-grown brands to capture a large slice of then Indian market, leverage the prevailing economies of scale and emerge as successful global brands in their own right.
This represents a transformation in a way of thinking. In part, it is based on national pride - something which propelled India to its independence in 1947. Most important, it reflects a real sense of confidence and strength based on ability. To date, international brands have done well in India. However, the advent of this trend will open very promising possibilities for astute investors.In previous posts, I have described my interest in investing in India.
Some of the strategic reasons:
- a growing population
- a rising middle class and improvements in standards of living
- a democratic country government which adheres (more or less) by the rule of law and a respect for property
- the emergence of a more business friendly climate in government
- a country that has the rare ability to accommodate variety (culture/language/religion) and yet function despite a rather chaotic environment ... this resiliency is an under-appreciated strength which should be considered by thoughtful investors
- a sense among Indians that India presents opportunities for advancement, hence the repatriation of entrepreneurs back to India from places such as the Silicon Valley
- educational institutions which can draw upon the "best of the best" into a high quality academic experience
- the gradual emergence of things required to nurture entrepreneurship: social networks (both national and international), sources of financing, unexploited domestic markets.
I am far more interested in investing in India than China for a variety of reasons:
- It is a democracy.
- The rule of law prevails - this in contrast to China where unaccountable officials can dictate and manipulate policy (Mao's Great Leap Forward was a disaster ... and the outcome of other top down efforts such as the state support of uneconomic ventures by state-owned companies remains to be seen.)
- India's population structure is more evenly distributed - this in contrast to China's skewed structure which will strain the country: fewer workers to support retirees who have little in the way of social safety nets, etc.
- It would appear that corruption is less of an issue that in years previous: The perception among U.K. businesses that corruption is a major barrier in doing business in India has halved, according to the latest edition of the U.K. India Business Council’s Ease of Doing Business report compared with what it was in 2015. https://www.thehindu.com/business/Economy/corruption-no-longer-among-top-3-hurdles-to-doing-business-in-india/article25541379.ece?homepage=true
This said, there are real barriers for retail investors:
- It is very difficult for "foreign" investors to understand that intricacies of how business is done in India. For example, there are assumptions in financial reports that may not be apparent .... ditto for assessments of market potential and the operating challenges faced by Indian companies.
- There are restrictions on stock ownership by foreign nationals. (Google the topic to learn more.)
- Unless one is prepared to spend a tremendous amount of time reading and travelling throughout the country, it is very difficult to get a "sense" of the place and its investment opportunities.
To overcome these difficulties one can invest in:
- mutual funds based on India (a non-starter for me due to excessive fees and often substandard performance)
- companies such as Fairfax India which invest, Buffet like, in Indian companies. This company represents a substantial parts of my holdings and was the topic of previous posts.
- ETFs (here's a list of 'em https://etfdb.com/etfs/country/india/
- ADRs https://www.https://topforeignstocks.com/foreign-adrs-list/the-full-list-of-indian-adrs/.com/equities/india-adrs
- direct investment in stocks listed on Indian exchanges https://stepupmoney.com/how-to-invest-in-shares-in-india-beginners-guide-to-stock-market-investment-in-india/
I enjoy reading Indian newspapers on line. They reflect the country: a wild mix of articles where authors do not hesitate to advance their views. Here are two of my go-to rags:
Sometimes, readers express a lovely sense of humour:
No comments:
Post a Comment