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Q3 2008, reporting from India

September 10, 2008 Leave a comment Go to comments

It has been exactly three months since I left the US to take up an investing role with a private equity fund in India.   It has been a fascinating transition on both personal and professional fronts.  I am hoping to get back to a posting with some frequency.  I want to focus for a while on my move since there are several of my friends considering global relocation options.  The clouds of uncertainty hovering over the US and Europe will probably hasten some of these decisions so please feel free to reach out to me if you are considering moving to Asia.

Here is the headline: professionally the move is amazingly satisfying, but personally very tough.

For this post I will quickly review conditions working/investing in India

The good:

  • The business environment  is humming: top notch professionals make sure business gets done.  I have worked closely with entrepreneurs, private equity investors, top corporate executives, bankers, lawyers, accountants, engineers, etc. and they are world class.    They come from a mix of backgrounds – graduates of top schools in India, from small towns, expats from around the world – but somehow work together to make things work really well.
  • Of incomes:  The rich have been getting richer: business owners and the folks that power India Inc. make big bucks (in real $ terms and not some contrived PPP adjusted scale).  The middle class is doing well and the poor are still struggling but seem to be better off than they were twenty years ago.  The absolute bottom of the pyramid is worse off since their incomes have not kept pace with inflation neither have social services to take care of their basic needs.
  • The economy: India’s “slowdown” and coupling to the global credit malaise means it will grow only 7.5% instead of the torrid 9%+ pace of recent years.  There does exist an asset-value bubble in real estate and a consumer credit overhang is beginning to cause some worry but neither of these risks is likely to cause a meltdown.
  • Public capital markets: The public markets have been very volatile recently and a lot of retail investors continue to sit on the sidelines.  But given the macro factors I have described above, there are some quality companies trading at ridiculously low valuations.
  • Private equity: The private markets also offer excellent values now and personally I am having a great time chasing deals here.  Valuations in India are low!  These are sometimes single digit multiples of near term earnings/free-cash-to-equity  (and not because they are bad deals).   Exits are usually in the form of IPOs on the local markets but a recent run of cross-border M&A is opening up other options for investors to seek liquidity.  More details on VCPE here will follow in another post.
  • The Office: I have traded my view of the salt-and-pepper-bridge across the Charles in Boston for a view of the Arabian Sea with its glorious sunsets.  The buildings command some of the highest rents in the world ($130+ but coming down slightly from there) and yet they are in bad shape.  They are reminiscent of old Soviet projects but they house the premier industrialists, bankers, PE firms and lawyers.  Thankfully, tasteful interiors, adequate power and air-conditioning make life easier but the elevators and common areas remind me of visits to the RMV/DMV in the US.   Newer and better office buildings do exist but they are not optimal for those of us in the PE business (we think).  Remnants of the colonial era are pleasing if you can get used to it.  An “office boy” is supposed to make me my coffee, clean my desk at the end of the day, change my bottled water, run errands, etc.  My American sensibilities are still getting used to this but on the other hand it creates a decent job for someone unskilled so I am trying.
  • Business travel: This is a bipolar situation.  Intracity travel is awful.  Traffic is painful with narrow underdeveloped roads where 10x the optimum number of cars ply without much regard to traffic rules.  Air-conditioned cars are a must.  On the other hand, intercity and international travel is HEAVEN compared to pretty much any western market.  Airports are a breeze, and airlines offer the best service anywhere at a very reasonable price.  Airports are being refurbished to be world class. More details on business travel in another post.

The bad:

  • Traffic: Refering back to challenges with travel, daily commutes can be very tough.  Unless you are at work by 8am, you will spend an hour to three in traffic depending on how far you live from work.    Likewise, it is hard to do more than one business meeting on the road in a day.
  • Time-shifted workday:  If you are used to being at work by 8am and at home for dinner by 7, I have news for you.  Here, nobody shows up for work before 9.30am and breakfast meetings do not start till 9am.  First meetings in the office need to scheduled around 11am to allow for visitors’ traffic constraints.  Lunch starts around 1pm and can go on till 2.30pm.  People are at work till 7.30pm and aim to make it to dinner by 10pm.  It is not unusual for friends or business associates to meet and eat till well past midnight (which is why the workday does not start the following day till 10am).   Those who know my preference for late nights would be surprised by my listing this in the bad section; it bothers me because I get nearly no time with family during the week.

All in all, it is a great time to be investing in an exciting country interacting with smart professionals.  It helps you overlook all the negatives that living in an emerging economy can harbor.

Categories: India
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