Stable Indian rupee, lower inflation will bring in big investments

INTERVIEW WITH Tom Heneghan

 

rupee
Is the ‘Make in India’ campaign, kick-started by Prime Minister Narendra Modi, good enough to attract the much-needed investments that can put the country back into a highgrowth path? Tom Heneghan, chief executive officer at US private equity firm Equity International, believes the country needs to do more to shed the perception that it’s a comparatively high-risk market to invest in. India is on the right path but it needs a more stable currency and reduce the risk of inflation to attract larger investments, Heneghan told in an interview.

 

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1. What is the perception of India as an investment destination among international equity investors?

People are gun-shy about investing in and coming back to India. Normally, when we invest, we have a view that users of capital must respect the capital and we believe that there must be a fair return for our investors. Then the cost of capital goes down and it’s beneficial for all — making it a virtuous cycle. Once investors have burnt their fingers, then they are afraid to put capital at risk. India scared us in the mid- 2000s when there was a lot of capital coming in. At a time like that, we were not sure if our capital would be well respected.

 

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2.Does India still have that negative perception?

India was always seen as a negative market and negative acronyms like ‘I’ll Never Do It Again’ (INDIA) existed. There is still some perception that India is a higher risk market and that may take some time to change. Restrictions on foreign investments here are a roadblock and I believe India needs measures that focus on creating a more stable currency and reducing the risk of inflation to attract international investors.

 

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3.Do you see any positive change in India?

Two significant changes have happened in India in the last year. It has got a new central bank governor and a new Prime Minister who are both keen to create a favourable business environment. The proposed REIT legislation in India is a positive step. It took the US nearly 30 years to get REITs right, hopefully India can compress that time frame. With these changes, India could see larger investments, considering it has an educated English-speaking workforce.

 

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4. Equity International invested close to $90 million in SAMHI hotels in 2011. Why did you choose hospitality and what were your Internal Rate of Returns (IRRs) in this sector?

India has had some difficulties with regards to regulations related to the real estate sector. Hospitality is an asset class that international investors can get interested in without any regulatory issues. We invested in SAMHI Hotels as part of our fifth fund when India was out of favour for most investors and its founder, Ashish Jakhanwala, had an attractive business plan. The investment in this business is close to $90 million.

 

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5. So, do you consider it a good time to invest in hotels in India?

Yes, there is a lot of new development here and the hospitality sector should see a turnaround in the next year or so. The two countries that consistently take my breath away are India and China with the scale of things they do. There’s a crane in every nook and corner of Shanghai — the construction there is eye popping. I get a similar feeling in India. Even in a slow period for India, in real estate, there is a lot going on.

6. What are the other areas you are considering for investment in India?

We would be looking at investments in the cell towers and finance sectors.

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source : http://articles.economictimes.indiatimes.com/