• 10 months ago
#NDTVProfitAtWEF | What does 2024 hold for risk assets and deal making?
Watch #JefferiesIndia' Aashish Agarwal and Mahesh Nandurkar in conversation with Niraj Shah on the sidelines of #Davos2024. #WEF
Read all #WEF2024 updates: https://bit.ly/420ODMW 

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00:00 Well, we are in a snowy and chilly Davos. The temperature out here is low, but the temperature
00:04 around India and probably dealmaking must be very high. And that's why the top brass at Jefferies
00:09 with us right here. Ashish Agarwal, Mahesh Nandurkar, need no introduction. Gentlemen,
00:14 thanks for taking the time out and being with us. Can I start with you, Ashish, a recap of
00:18 how 2020 turned out to be as a year for risk assets, for dealmaking,
00:24 India interest and what does 2020 for hold in store? Sure. Thanks, Neeraj. It's been a great
00:30 year, I think, for us as Jefferies, for India as a whole. We've seen record dealmaking in 2023. It
00:36 was a great market from an IPO perspective, from a secondary deal market perspective.
00:41 We at Jefferies India have been extremely enthused about India opportunities and have been part of
00:47 really some marquee transactions over the last 12 to 24 months, getting good response from
00:52 investors. I think investors are looking at India in a fresh light with continued outperformance.
00:58 I think the only sore point was the aggregate FII inflows in India in 2023 were way lower than what
01:06 one would have thought. But as a house, we believe they can double in 2024 as more and more investors
01:11 start looking at India opportunity in the secondary market as well as on the primary side.
01:18 We are expecting, I think, a few themes to continue to stay robust as a house. Real estate
01:24 is seeing strong pickup. Power is seeing some strong pickup. I think not the traditional areas,
01:30 but new areas will start garnering a lot more inflows and a lot more interest from the investors.
01:35 Double in 2024? Yes, I think that's what we will start by saying. And hopefully we can build on it.
01:41 And last year was all about domestic savings and that will continue. But FII flows, especially
01:48 given this is the time of allocations, India looks shining, political stability has improved,
01:54 the outlook has improved. And with that, maybe a few investors will prepone their allocation,
02:00 whereas they would have maybe waited for the second half of this year. But that can change
02:04 given what has happened over the last two, three months or so. Mahesh, how are you reading into
02:08 some of these things? No, I completely agree with what Ashish has said. I'll just put that
02:15 20 billion dollar number into the context, because last year we saw foreign inflow of 20 billion
02:21 dollars. It's actually not a very large number. We used to see 20 billion dollars in 2010,
02:27 2012, 2013, 2014, etc. And since then, India's market size has gone up 3x or 4x. Also, the
02:35 assets under management globally have gone up 3x, 4x. So what we have received in the context of
02:41 those numbers is actually very small. So I'll actually not be surprised if it doesn't double,
02:46 but maybe even goes more than that. And I know I'm making a big statement here,
02:50 but yeah, it's what I feel. But yeah, I clearly believe that markets are something that never
02:58 move in one direction. So there will be some ups and downs for sure. But if you look at the
03:04 longer term structural story, and especially we believe that after a gap of nearly a decade,
03:09 we are seeing all the three aspects of CAPEX cycle firing in at the same time, which is
03:14 the government sort of CAPEX focus or the policy focus on the CAPEX side,
03:18 the real estate, and also the broader industrial capacity additions. And I think that is going to
03:25 lay a strong foundation for GDP growth over the next decade or so. So yeah, clearly, we believe
03:32 that there could be some market corrections for sure, but those corrections should be bought into.
03:36 I'll probably just add on to that. I think historically in our engagement,
03:42 one of the strongest pushback on India has been the depth of markets, the liquidity and the size
03:47 and scale. I think one of the things that has changed significantly is the number of companies
03:51 that cross the threshold of a billion dollar, $5 billion, $10 billion has doubled. And liquidity
03:57 has improved significantly. Jefferies India has been involved in a number of deals which have
04:02 ranged from half a billion dollars to as much as $2 billion in a single stock, 15% of a company to
04:07 50% of a company. And that shows the depth of the market. And I think that's what will bring in more
04:12 flows because people have the visibility to be able to deploy large ticket sizes in India,
04:18 unlike a few years back where you know, to deploy a billion plus in a single stock was limited to
04:22 very, very few numbers. Okay, so that's an important point as well. I would love to dwell
04:28 for both of you to dwell upon what is it that you are hearing thus far out here at the WEF? And what
04:34 are the kind of conversations that are lined up because companies that we spoke to yesterday,
04:38 global corporations are all talking about increased interest in India, make in India,
04:43 for India, make in India for the world service companies talking about how difficult it is
04:48 to ignore India from an R&D setup perspective or an employee perspective as well. So what is the
04:53 kind of conversations that you have had thus far? And what is it that you anticipate for the rest of
04:58 the WEF? Maybe I'll start off and Mahesh can add, I think the themes that we have picked up over the
05:04 last two days, definitely AI has become a big thing and Indian companies are here in reasonable
05:11 representation, pioneering that theme. There is a large contingent from government as well. And
05:18 clearly you're seeing trends like the government is trying to invest, get more investment and trying
05:23 to ask investors, how can we make it easier? So the awareness of India has been there. I think we
05:28 are now putting in blocks to solve for issues that are some bottlenecks at the margin. So talent to
05:35 tech, I think is one of the themes that we are clearly picking up on the AI side, more investment
05:40 in India, a lot more representation from the states. I think those are things which will
05:45 facilitate investments, not just in capital market, but in real assets, in infrastructure
05:50 and beyond and so forth. Yeah, just to add on, we are clearly seeing a strong government presence
05:57 here. We have three government of India lounges, we have the CII lounge. In fact, we have five
06:03 different state governments also having their own lounges. And just to build on to what Ashish
06:08 mentioned, what you're seeing is the government officials are clearly trying to understand
06:13 the bottlenecks, if any. It's not just the chest thumping. There's a clear and honest exercise to
06:19 understand the key investor concern. We ourselves have been instrumental in getting a lot of large
06:24 investors, be it private place or public place, multi-asset, etc. And we've been organizing
06:30 interactions for them with senior government officials. And I can clearly see a very
06:35 meaningful dialogue going on. And I think this can actually further improve the ease of not just
06:45 doing business, but ease of investing in India as well, which will probably be a big factor going
06:52 forward. One last question, and that is around what kind of promise does a policy continuous
07:03 India bring to global investors? Now, I'd love to understand what are people talking about from
07:07 that front, because 40 to 50 countries going for elections in 2024, presumably very few have the
07:14 predictability of policy, at least in the large nations that India would be having. Is that a
07:18 factor that is coming up in conversations? And what else would you be seeking to understand from
07:24 people who are wanting to make either a fresh investment into India or double down on what they
07:31 already have in India? I think the one thing that really makes India stand out versus a lot of other
07:39 EMs is sheer diversity of opportunities to invest in India. If you look at the listed space per se,
07:46 it has a mix of everything, consumption to export to local to Capex, which is, I think,
07:54 something that investors really appreciate. Most of the other EMs, barring one or two,
08:00 have dependence on either a particular company or a particular industry, whereas India offers a lot
08:06 more opportunity. I think, again, Jefferies India, Jefferies as a firm, we are very bullish on India
08:12 outlook. We have been strengthening our presence here. We moved into a new office, hiring more
08:17 people, building a new team, and clearly see India as one of the most profitable markets and
08:22 growth markets for us as a firm. Okay, Pahesh, you want to add to that? Yeah, I think I would
08:28 definitely say that a lot of investors that we interact with, and in fact, we had a chance to
08:33 meet with some of the business CEOs as well. I think the policy point that you mentioned,
08:40 I think that is very important. And I would say that while the government itself, because of the
08:45 fiscal constraints, might be, say, lowering the Capex growth that the government has been
08:50 putting with its own money through the budget, that number might come down. But I think over
08:55 the last several years, we have seen a solid foundation building by way of the GST implementation,
09:01 by way of, I would say, the bankruptcy law, the private corporate leverage level is at an
09:06 all-time low, the housing cycle is looking up, and with the laws like RERA getting passed,
09:12 the homebuilders' confidence is also on the rise, which is giving longevity to that cycle.
09:19 So I think all these policy initiatives are clearly going to be the key driver for growth
09:23 going forward, and that's what we are picking up from here in Davos as well. Okay, great. Gentlemen,
09:29 thank you so much for joining us today, and all the best for the remainder of the stay in Davos,
09:34 and look forward to interact more with you on NDTV Profit. Thank you very much,
09:37 Nilesh, thanks for hosting us. And viewers, thanks for tuning in.
09:40 [Music]

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