What is your feeling towards India?
It is the same. In some ways, the same feeling I had at the very beginning of my trips to India but now it is even more exciting because of all the activity that is going on and what I am hearing from some of the companies themselves, the exciting growth prospects that they have.
I know you have been an India bull but in the recent past, we have also seen geopolitical tensions and there has been quite a bit of collapse in the Nasdaq stocks as well. There have been a lot of concerns about how richly valued some of the largecap companies have gotten. Where does India stand right now with the geopolitical tensions, with rising costs of steel, commodities, crude as well as labour cost?
Mark Mobius: When you are in investment business, you realise that you can make predictions about the macro environment, GDP growth, inflation etc but at the end of the day, there are opportunities in almost any environment, irrespective of where the economic activity is or where the GDP is going. And that is certainly true in India.
The opportunity in India is there because of the numbers – there’s 1.2 billion people with an average age of 26 compared to China’s 36. Given the fundamental characteristics of the economy, they provide great opportunities.
Interestingly enough, on this trip, we are particularly interested in the tech sector and I agree that value is in the medium and small cap area which is why we do not believe in buying the index. I do not believe in buying an ETF for India.
I believe in buying specific Indian stocks that have good characteristics. I was talking to one of the software companies here in India. I asked him about staffing and he said they are facing a difficult time. He said they were ready to pay top dollar but most of the people they were talking to, did not even want to talk to them and they are starting their own companies. So there is this incredible entrepreneurial activity in India, which is so exciting and that means down the road, there are going to be great opportunities for investing.
How has Mark Mobius the investor changed over the years?
My whole view of what parameters to look at has changed over the years. Nowadays I do not look at PE. I do not look at the price to book because the whole environment has changed, the interest rate environment has changed and the company’s role has changed. I look at return on capital, return on equity and then I look at debt, and of course EPS growth. So these are the kinds of things that I am looking at and we find so many companies here in India unlike so many other markets around the world that have very good numbers in those characteristics.
How does the retail investor go about scouting for hidden gems? Are there themes that they look at, do they invest with people like you?
Of course, they must invest with us. By the way our fund did exceptionally well last year, thanks to the Indian stocks we have in our portfolio. So I have to thank India.
So give us a flavour of the India portfolio. Do you have IT services or new-age tech companies?
We love companies that are in traditional industries. So, let us take industries that have been around but are using technology to upgrade the efficiency and the profitability and that is the key to ROE, ROI, the use of technology to improve performance.
One of the things we have to discuss here is ESG plus C. We have added C for culture. What we found is that while looking at all the numerical parameters has really helped us a lot because it has reduced our risk, if we look at the environmental impact of a company also, we can reduce the risk. If we look at the social impact, the same thing. Governance, of course is critical and the culture within the company is again the life of the company. It makes the company great.
What we found in India is that the transparency is very good. In other words, Indian corporate personnel, who are very good in communicating what they are doing or willing to talk to us about what we are doing and what our objectives are and what their objectives are and we have been working with a number of these companies to see how their ESG plus C characteristics can improve.
I do not know if the recent ITC, NTPC, Coal India investors would agree with you. I think of late, ESG has gone for a bit of a toss. but I get your point.
My advice for people who are going to buy individual stocks is they look at that as well as the numbers of course but very critical is the ESG plus C, not because everybody says you got to be good to the environment and everything, but in order to reduce risk this is the best way.
If India was a listed stock would you bet on it for the next five years or ten years or for the next foreseeable few decades?
I won’t buy it if it is an IPO but if it was listed with a track record, I would buy it.
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