Limited partners cautiously optimistic towards India

Written by Nitin Shrivastava | Updated: Sep 2 2014, 07:21am hrs
Wassim Moukahhal, senior vice-president at the UAE-based Samena Capital Investments, believes that though the investment outlook for India has improved, the country needs to remove infrastructural bottlenecks to become an industrial power house. In an interview with Nitin Shrivastava, Moukahhal said Samena Capital, which oversees AUMs of $850 million across the subcontinent, Asia, Middle East and North America (MENA region), continues to focus on technology and innovation-led companies rather than asset-heavy manufacturing companies. Excerpts.

What do you think of the current LP sentiment towards India. Are you planning to raise new funds, given the buoyant markets

Limited partners (LPs) are certainly positive towards India, given the recent developments, but want to make sure that general partners (GPs) have learnt their lessons in the last five years, in terms of discipline on entry valuations, careful choice of promoters/business groups to invest with, attention to exit by structuring investments on the way in and, finally, wherever possible, gaining a measure of control. We have sufficient dry powder to continue investing for al least another couple of years. Also, we have shown in our recent Rak Ceramics deal, that we can quickly raise capital for individual deals we put together $250 million in just under three months for the Rak Ceramics transaction from our shareholders, LPs and sovereign wealth funds and family offices that we have strong relationships with.

Whats your view on the defence segment in India given the recent changes related to FDI

We are bullish on Indias defence and aerospace sector and have two long-standing investments that are likely to benefit from the recent policy announcements. The first of these is in a Bangalore-based company called Dynamatic Technologies, which is perhaps the leading Indian aerospace player (outside of the MNC jvs), having recently emerged as a Tier-1 supplier to Airbus in addition to its contracts with Boeing, Bell Helicopter and the Indian Air Force. Our other defence-related investment is in HBL, a Hyderabad-based engineering company, whose sophisticated communications and power systems go into tanks and aircraft.

What do you make of the macro-economic conditions in India with respect to industrial and manufacturing growth

While improvement in the overall macro outlook will help, India cannot become an industrial and manufacturing power unless the government pushes through fundamental reforms in labour laws and the land acquisition framework, and improves transport and power infrastructure across the country. Therefore, we remain cautious investors in this sector focusing on technology and innovation-led rather than asset-heavy manufacturing companies who have already proven their competitiveness on a global basis.

Our investment in Rak Ceramics, which derives nearly 12% of its revenues from India and is the only MNC with a plant in the country, is one such case as our investments in Dynamatic Technologies, HBL and in Jubilant Life Sciences.

Your outlook on the auto sector in India and, particularly, two-wheelers segment

India is today the largest two-wheeler market in the world, having recently overtaken China in terms of volumes. The market continues to grow at a double digit rate. In addition, exports are a real opportunity as India emerges as the two-wheeler hub of the world. We are very bullish on this sector as our investment earlier this year in Mahindra Two Wheelers demonstrates.

What was the rationale behind your latest investment in RAK Ceramics

It was a secondary deal wherein we bought 31.5% stake from ruling family of Ras Al Khaimah. RAK Ceramics is a rare example of a global champion that has emerged out of the Middle East region. Of course, everyone knows Emirates Airlines and talks about it, because Emirates was supported heavily by the Dubai government and all that. RAK, on the other hand, has come up on its merits by developing good technologies, good products, high quality, and established a brand and a footprint in India, Bangladesh and China and so on, plus exporting to 160 countries.