VIDEO: ‘Few global investors have a realistic view of India’

The investment environment in India is changing and risks that were present a decade ago have been addressed, GIP India’s co-head MK Sinha, told us in a recent interview. In addition to explaining how the country’s infrastructure sector has evolved, he also outlines the fund manager’s strategy following the acquisition of IDFC Alternatives’ infrastructure business by New York-based fund manager GIP earlier this year.

Q: What strategy is GIP pursuing when it comes to participating in an emerging market like India?

MKS: GIP will continue to do what IDFC Alternatives has done quite successfully, in the Indian infrastructure market in terms of roll-up strategy acquiring operating assets that are difficult for global investors to acquire, because of origination and execution bandwidth that’s required to roll-up assets and create platforms.

As an Indian team, we did not have a relationship with a global strategics, and the global strategics did not have the benefit of feet on the street here on the ground. Now, as GIP India, we will be able to provide that, and we could work in partnership with global strategics who are looking for an entry strategy, de-risked entry strategy into India, to acquire large assets. So, we will address both the opportunity sets in the market, which is a roll-up strategy of small assets and aggregating them into platforms and addressing the not-so-often large assets that get to the market, in partnership with our global strategic relationships.

Q: What are the main risks that have to be taken into account when you invest in Indian project, and how do you balance them?

MKS: The risks in the Indian market has been over the years been addressed. So, some of the risks that people were taking 10 years ago are no longer risks, and the government of India, actually in the past four years, has proactively worked to address a lot of the risks, such as resource allocation, call-block allocation that was done on nomination basis has now switched to electronic platform where you bid transparently; environmental permitting process has been clarified… so some of the risks have been addressed. The two key risks that are outstanding are land acquisition and contract enforcement.

There are very few global investors that have a realistic view of India or a balanced view of risks. While there are risks investing in India, one has to have a balanced view of those risks and invest accordingly.