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On the Challenges and Opportunities we see in India

By : Ziad K. Abdelnour| 9 May 2010
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We believe that despite a challenging regulatory environment, strong fundamentals in India continue to offer some highly attractive investment opportunities.

After some difficult times that witnessed both the global financial crisis and an internal food crisis brought on by weak monsoons, India’s economy is surely recovering and is expected, according to world leading economists, to grow by 8% this year, buoyed by lower interest rates, rising consumer demand and a strengthening jobs market.

The good news is that unlike China, which faces structural change as it shifts from an export-driven to a consumer-driven economy, India’s growth has long been dependent on domestic demand, even as exports have risen. However, its major weakness remains infrastructure, with basic transportation, power grid and irrigation systems lagging behind those of China. In a welcome move, the government plans to increase infrastructure spending by INR1.74 trillion ($38 billion) this year and that is always welcome.

The better news is that unlike China and Brazil, which have witnessed an increase in acquisitions by local private equity firms, India attracts a greater proportion of foreign private equity firms. The country’s legal and governance systems have indeed long attracted private equity investors from around the world which bodes very well for us at Blackhawk.

Further, and since the opening of the economy in 1991, the country has seen huge improvements in both capital markets regulation and in corporate governance. The capital markets do indeed impose higher standards of governance on Indian listed companies, judged by international benchmarks; and while the regulations per se are of a high standard, enforcement has the potential to improve further.

On the same note, and since India’s banks largely avoided the credit freeze that plagued developed countries, access to capital has not been a significant issue. In turning to private equity, Indian companies are seeking partners who can bring them sector knowledge, operating expertise and access to new markets and technologies; which is exactly what we at Blackhawk seek to bring to our portfolio companies.

Looking ahead, we believe India should continue to be a growth market, with minority investments the norm. However, buyouts, currently approximately 5% of all transactions involving Indian targets, may gain acceptance longer term and this is very good news for investment groups such as Blackhawk seeking control. Exits should pick up over the next few years, as firms look to take profits on investments made between 2004 and 2006.

In conclusion, I think it is fair to say that the secular trend is for India’s economy to grow during the period 2010-2012 at significantly higher rate than the U.S. or economies in Europe. The road will be bumpy on occasion, because development is not a neat process. However, it is this very growth, together with occasional discontinuities, that will continue to create unusual profit opportunities for us and our partners.

Now, if you are given an opportunity to make only one drastic impact in India, what would it be?

Looking forward to doing business with you and to continue being your resource for deals, capital, relationships and advice.

Your feedback as always is greatly appreciated.

Thanks much for your consideration.


  1. prakashkapilaprakashkapila

    India is in cusp of second tier of reforms,that will enable all those who are in the know and in midst of them reach exponential results.But as with any, most of the work is to enable and embed progress in hearts and minds first and then translate it operationally.With a fair legal system that is not prejudice with government, India has real potential of people who want to go to the next zone instead of being a me too entity

  2. Bobby MenonnBobby Menonn

    Although this is a fairly old blog, I chanced upon it once again in conversation with Ziad. I’d like to highlight the one point in this blog – about what drastic impact I’d make if given an opportunity in India. I’d say – Investments in Infrastructure & Healthcare. Two areas where there is a chronic need and huge amounts of Foreign Direct Investments (FDI) is being encouraged. In the last four weeks, Mr. Obama has been to India with an entourage of the best of American business heads, Mr. Sarkozy was here with an Airbus full of French Businessmen, the Russians are coming, the Germans are coming and guess what? Even the Arabs are coming in. Why? Despite what most people say about India, as an Indian, what I can tell you all is the huge flexibility that is, in my opinion, a must for business to thrive. And India is the epitome of flexibility – more because in this period of our history we are witnessing phenomenal growth and due to this one fact – high volume growth – one has to change constantly. The scope and scale for investments to appreciate very optimistically in these two sectors is so huge that even Government projections have fallen way short of actual and higher investments pouring into this sector. What I offer is for companies to come into India, “smoothen” bureaucratic hurdles, and ensure a hassle free growth on their investments by way of local advice, local intelligence, and / or any other localized support that ensures a total lack of hindrance to either investment growth or operational hassles (at a project level) Welcome to India, ladies and gentlemen… The future is here.

  3. Mehul ThankiMehul Thanki

    Times are changing and as always these are difficult times, there are limitations a no of them but there are opportunities as well which out weights the limitations. Indian growth is not driven by steroids it has its fundamentals right. Historically capital has been too difficult to come in Indian context, that had impacts on the way things are done in India , At the same time every abundance is always a chance to create a kitty (which every way possible ) and thus the execution has to be flow less(at a very high level of vigilance) for the given context

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