Australian fund investing in India returns 69% in 12 months

Mugunthan Siva is CEO of India Avenue Investment Management

Thinking of investing in India? The India Avenue Equity Fund returned 69.4% over a year August 2020 ending 31 August 2021, outperforming its benchmark (MSCI India in AUD) by 14.4% in the same period.

India Avenue Investment Management (IAIM) is a boutique investment company focused on providing investment solutions for clients in Australia and New Zealand who seek exposure to India’s growth potential through its capital markets. Click here for their website:

Over the last month the India Avenue portfolio has started increasing exposure to companies leveraged to urban consumption thematics. Given India’s vaccination drive, it is anticipated that close to 100% of India’s urban population above the age of 20 will be vaccinated (currently vaccinating at a pace of more than 10m per day) by the end of 2021.

Recently they have added stocks to the portfolio which are focused on the food delivery model or restaurant chains and fast-food outlets that are likely to benefit from rising propensity to eat out of home. India’s food delivery market is expected to grow from around US$5bn to over US$20bn1 over the next five years. Factors which are propelling online delivery are:

• Changing lifestyles and eating habits, driven by the lack of availability of time and rising

wealth as well as the rising prominence of the change of household structure in cities.

• Rising digitization (internet and smart phone penetration), particularly amongst India’s

significant millennial population.

• Rising urbanisation of India

• Growing working population, particularly amongst young women.

• COVID-19 has propelled the urge to eat prepared food with contactless delivery points introduced by Zomato, McDonalds, Pizza Hut, KFC, Dominoes etc.

The number of times Indians eat out rose from 2-4 times per month in 2010 to 6.6 times by the end of the last decade. Additionally, the average spends of a consumer rose from Rs.1000 to Rs.2500 in a month2

This was especially prevalent amongst India’s millennials in Tier I and Tier II city locations. This trend has been accentuated by food technology, social media and marketing, health, and wellness and as well as the evolution of consumer palates for ethnic diversity in food choice.

INTO INDIA has consistently pointed to the large number of vibrant Tier 1 and Tier 2 cities for trade and investment.

The CEO of IAIM is Mugunthan Siva – Mugunthan.Siva@indiaavenueinvest.com

Business with India? Leave your ego behind and let Indians run the business

Pretty much every western company that has succeeded in India has done so on the support of a strong local Indian team across all levels. To do this, they have effectively left their ego behind.

Those who struggle typically want to transfer their “culture” to India so they put their expat team in charge of the local team. This is ego centred and mostly does not work. These are mainly companies that do not trust the locals and are over-confident about their own “head office culture”.

Being preoccupied with transferring “the way we do things in our company” to India makes them blind to “the way Indians do things there” which is the most important insight for future success.

So – local management teams are essential in India (and probably anywhere you go in Asia) and that team should lead and manage your enterprise throughout India. This does not mean you do not provide the support of some expats – of course good companies do, but this is to empower the local team. Expats can come and go as needed – but your business needs longevity in India and that is what an Indian management team can provide.

Smart companies that go into Asia also ensure they hire Asians into the HO team, so you have Asians running your enterprise on the ground in Asia and Asians at the right level in HO guiding and advising the HO team.

Real access to family and business networks in India (and probably all of Asia) is mostly only achieve by Indians.

Conclusion – if you want to succeed in business in India, rely on Indians to run your Indian business.

Affordability and lack of credit holding back India’s digital economy – but not for long

Nitin Jain is CEO and principal fund manager at Kotak Mahindra Asset Management (Singapore)

While predicting rapid growth, Nitin Jain of Kotak Mahindra Asset Management (Singapore) says there might be one catch – the India digital economy has to overcome one big hurdle – affordability. This is matched by a shortage of consumer credit.

Nitin Jain explains:

With per capita incomes of about $2,000 and large infrastructural challenges, to offer a value proposition at a mass level is extremely challenging, and requires large capital.

2021 has been a breakout year with more than $20bn in funding so far this year and almost $10bn in July 2021 alone. Prior to this the average was just $8bn-$10bn per year.

The future is looking bright for India to become a credit-rich country enabled and backed by data. Fintechs with buy mow pay later (BNPL) businesses will help fuel the data backed credit boom.

With one of the youngest economies with about 1.4 billion people, the highway to growth is long.

India already have more than 100 million users on Amazon, and travel, transport, ed tech, food tech, gaming, SaaS in enterprise and mass, are seeing millions getting added every month.

Traditional businesses tend to grow in an algebraic way, but digital businesses are growing at geometric scale and some potentially at logarithmic scale. 

We as investors are keenly analysing these changes and investing in upcoming opportunities and remain hawk-eyed on potential disruptions.

A vibrant digital ecosystem throws in immense possibilities of large capital coming to India.

Tens of billions have been invested by global investors in Chinese internet businesses and India is at a similar stage and with the recent chaos, potential realignments can accelerate the flows.

Y2K was a watershed moment for India IT services and 20 years later, Covid-19 will likely be a watershed moment for the Indian digital economy.

Indian economy primed for growth – old and new

Nitin Jain CEO and principal fund manager of Kotak Mahindra Asset Management (Singapore)

For investors, India is at a very interesting juncture, according to Nitin Jain of Kotak Mahindra Investment Management.

The old economy is set to make a comeback after a Covid-19 hiatus and the digital economy is primed for hyper growth – perfect combination!

Nitin Jain says: “The latter is becoming more pertinent when we see serious regulatory challenges emanating from the biggest new economy play in the world, China.”

On the day when the China ed-tech companies and other new economy stocks were reeling under the fear of profits being taken away, Zomato, a fast growing Indian food tech company had its listing day gains of more than 50%.

Close on the heels are many other digital businesses which are getting ready for listing.

Indians are already hooked to the internet and now we are seeing transaction-related internet businesses gaining mega scale. 

In fact, around 750 million have access to a mobile payment system tied with the Aadhar card, a biometric card which uniquely identifies an individual and is very easily accessible by any business, government services, and healthcare services securely, seamlessly and at almost no cost.

So – time to review your investment and business/market entry strategies?

Infosys now in the “big four” of Indian companies

Infosys, a global IT firm headquartered in Bengaluru, joins the “big four”

Infosys Ltd this became the fourth Indian firm to reach a market capitalization of US$100 billion.

The IT services company has joined TCS (Tata Consulting Services), Reliance Industries, and HDFC Bank in passing the US$100 billion market value threshold.

Reliance Industries (originally a petroleum business but now diversifying to telecoms and retail) is the most valuable company, valued at US$184.69 billion), followed by Tata Consultancy Services (TCS) at US$181.18 billion and HDFC Bank at US$113.51 billion.

Something else to turn your mind to India – India’s GDP is likely to grow at 18.5% in the April-June quarter this year, according to an SBI report.

India second to China for APAC startups and globally third largest unicorn ecosystem

According to GlobalData, Indian entrepreneurs received US$ 16.9 billion in venture capital investment in 2021, second only to Chinese peers in the Asia-Pacific (APAC) region.

According to GlobalData’s financial transactions database, 828 venture capital financing agreements were reported in India between January and July 2021, with a total declared funding value of US$ 16.9 billion.

Flipkart raised US$ 3.6 billion, Mohalla Tech (ShareChat) raised US$ 502 million, Zomato raised about US$ 500 million, and Think and Learn (Byju’s) raised US$ 460 million in India between January and July 2021.

“While several of the top major countries globally saw a drop in VC financing value in July compared to the previous month, India managed to display growth despite a decline in VC funding transaction volume,” stated Mr. Aurojyoti Bose, Lead Analyst at GlobalData.

India has becoming a digital-first economy as smartphone usage has increased and mobile Internet has become cheaper. As a result, IT firms have benefited the most from this trend.

According to GlobalData, India has the world’s third-largest tech unicorn ecosystem, after only the United States and China. VC investors are showing interest in companies in e-commerce, social media and social networking, food delivery, edtech, and digital payments at the COVID-19 pandemic, according to Mr. Bose.

Australia: home to 48 of the world’s top 50 most innovative companies

Bosch and Monash University team up on “smart agriculture”

When you think Australia you might call to mind minerals, vast fields of agriculture or cricket.

But there is another reality about Australia – it’s a smart place.

International companies are leveraging Australia’s talent, government support and research to boost productivity, competitiveness and growth – according to data from Austrade and Boston Consulting Group.

Forty-eight out of Boston Consulting Group’s top 50 most innovative companies operate in Australia. These companies have partnered with Australian organisations to research additive manufacturing, renewable hydrogen technology and cloud supercomputing, among other areas.

Advanced manufacturing: General Electric

GE subsidiary GE Additive and the University of Sydney are establishing a high-tech manufacturing hub. The Sydney Manufacturing Hub will advance Australia’s capability in metal additive manufacturing technology.

Agricultural technology: Bosch

Bosch Australia and Monash University are co-developing Australia’s first smart agriculture research facility. The facility will contain a prototypical ‘smart farm’ to test: artificial intelligence; automation; robotic and advanced sensor technology solutions

Energy: Hyundai

Hyundai, Fortescue and CSIRO are working together to develop renewable hydrogen technology. The group seeks to:

  • develop new hydrogen technologies with the potential for bulk transport
  • build a renewable hydrogen refuelling facility, to deploy hydrogen fuel cell coaches
  • build the first combined hydrogen production and refuelling facility in Western Australia. 

Healthcare: Johnson & Johnson

The Johnson & Johnson Innovation Partnering Office @ Monash is a hub for researchers and early-stage companies. The facility allows them to develop novel pharmaceutical, medical devices, and consumer healthcare solutions.

Technology: Amazon Web Services and Intel

Amazon Web Services, Intel and AARNET established Australia’s first cloud supercomputing facility. Based at RMIT University, the facility focuses on advanced data processing and computing.

So, from the land of minerals, farming and cricket – there is also an advanced technology reason to team up with the Aussies.

Australian critical minerals, infrastructure, energy, technology, agribusiness, education and space – step up to the table for FTA talks with India

The Australian Trade Minister, The Hon Dan Tehan MP, last week pointed to Indian FTA priority areas such as critical minerals, infrastructure, energy, technology, agribusiness, education and space.

He announced a speeding up of talks with India last week and chose the launch of the Canberra chapter of the Australia India Chamber of Commerce to also announce an update of the India Economic Strategy.

This is a great time for business to step forward. You can have a say. You can be at the FTA discussion table.

The Minister said he had asked former Prime Minister, Tony Abbott, to visit India for meetings around the Comprehensive Economic Cooperation Agreement (which is an FTA).

He announced to the AICC that both countries were hopeful of concluding negotiations this year – a dramatic ramping up of the pace.

The AICC has the Hon. Ted Baillieu AO as its Founding Patron.

Australian Trade Minister announces boost to India FTA talks at launch of Australia India Chamber of Commerce chapter in Canberra

Major announcements made at launch of Canberra chapter of Australia India Chamber of Commerce.

The Australian Trade Minister, The Hon Dan Tehan MP, chose the launch of the Canberra chapter of the Australia India Chamber of Commerce to announce both a speed up to negotiations on a Free Trade Agreement and an update of the India Economic Strategy.

The Minister said he had asked former Prime Minister, Tony Abbott, to visit India for meetings around the Comprehensive Economic Cooperation Agreement (which is an FTA).

He announced to the AICC that both countries were hopeful of concluding negotiations this year – a dramatic ramping up of the pace.

The Minister pointed to trade and investment in areas such as critical minerals, infrastructure, energy, technology, agribusiness, education and space.

AICC in Canberra is led by Tony Huber, a Director within DFAT and former Consul in Mumbai, and Deepak Raj Gupta, former Member of the ACT Legislative Assembly.

If India’s tier 1, 2 and 3 cities attract Mercedes, maybe they should attract you?

India’s High Commissioner to Australia, HE Mr Manpreet Vohra, spoke at a recent Australia India Chamber of Commerce function

Really interesting comments made recently by the outstanding Indian High Commissioner in Canberra – His Excellency Mr Manpreet Vohra:

We all know the mega cities of India such as Mumbai, and everyone wants to be there, but what about the tier 1, 2 and 3 cities which account for:

50% of all Mercedes Benz sales in India

60% of Amazon sales

50% of the entire digital economy

You can see why India is set to be the world’s fastest growing large economy in the years 2021 and 2022.

Well done to the Australia India Chamber of Commerce for this event.