Last year we published a short article on value investors finding opportunities in India and highlighted the record of Amitabh Singhi who spoke at the Value Investing Congress in October 2010. Although China has received the bulk of attention from emerging market investors in recent years, the massive market opportunities presented by the rapidly growing Indian economy are difficult to ignore.
Rahul Saraogi, Managing Director at Atyant Capital, will make a presentation at the 6th annual Value Investing Congress West in Pasadena on May 3 and 4. According to the Congress web site, Mr. Saraogi currently manages the Atyant Capital India Fund and has focused exclusively on the Indian markets over the past ten years. It appears that his investment style leans toward concentration since his goal is to identify the best ten to fifteen opportunities from the thousands of publicly traded Indian corporations.
Trillion Dollar Opportunity
In a recent interview with the Value Investing Letter (free registration required), Mr. Saraogi comments on India’s pitiful infrastructure which has impeded economic growth in recent years. Although the inadequate infrastructure is a major issue, the need to make upgrades can also be viewed as an opportunity for investors:
India’s inadequate infrastructure I think is actually a huge opportunity. India needs to invest 1 trillion dollars over the next 5 years in infrastructure just to meet present demand. India’s infrastructure trajectory will be very different from China’s. Most of China’s infrastructure has been government directed and built either directly by the government or government owned companies. India has realized that the government is incapable of building anything (thankfully so). Infrastructure in India will be built only using a public-private partnership model. In some sectors like telecom, airports and power, the model has been tested and has either taken off or is in the process of taking off. In some others like ports, roads, railways and urban transportation, the models are evolving and have had moderate success. The problem for some time will remain in sectors like water, sanitation, waste management and urban infrastructure where all models have failed. Unfortunately these are the sectors that most glaringly showcase India in a poor light to visiting foreigners.
With an economy that has averaged 8 percent growth in real GDP over the past decade and has a population of 1.2 billion with half under the age of 25, the market opportunities seem clear for companies that can navigate the Indian bureaucracy and investors agile enough to pick the winners and losers. While the local knowledge required in Indian markets probably rules out most companies for all but the most skilled investors, it may be interesting to explore the opportunities further at Mr. Saraogi’s upcoming presentation.
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