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India: Where Lies the Next Big Investment Opportunity?

Rajesh Subramaniam
Wednesday, September 1, 2010
Rajesh Subramaniam
A vibrant economy, 1.1 billion people, a burgeoning middle class, 8 percent sustainable growth, robust legal and regulatory framework, and an entrepreneurial community continuingly looking to innovate make India an extremely promising investment destination. Our investment thesis is to seek, create, nurture, and develop investment opportunities across a wide spectrum of businesses that form the nucleus of fuelling the Indian consumption driven growth story. Every conceivable sector in India is under-penetrated. Financial services, healthcare, education, infrastructure development, logistics, and so on and so forth. Let’s take a look at some numbers: Outstanding bank credit of $650 billion compared to a GDP in excess of $1 trillion; mortgage to GDP ratio of 7 percent compared to 80 percent in the US and 86 percent in the UK. Healthcare spend is about 5 percent of GDP as against 15 percent in the US and is extremely fragmented. Private education spend estimate to reach $80 billion by 2012, which is currently, less than 5 percent of GDP. The opportunities to play in the supply chain of each of the sectors above will create valuable businesses in the future. The key opportunities lie in enabling access, creating a robust fulfillment framework, and productizing the learning that enables IP creation to drive innovation. Disruptive business models enabling dis-intermediation and consolidation at both ends of the spectrum and supporting superior execution are key. The pain points are many, solutions many, and capital finite. Backing passionate, highly driven entrepreneurs who are bold and audacious thinkers with proven execution skills is what we seek.

Application of technology is omnipresent in driving all forms of innovation; right from a block buster drug discovery to making hot dogs in lesser time that improves utilization and productivity. Breakthrough ideas in healthcare provisioning that saves lives, delivering financial services applications to the under-banked and helping them move up from the base of the pyramid, and enabling the best in class educational content and teaching access at price points that will penetrate beyond just the privilege of few are some of the key trends that we see evolving. With 500 milion+ mobile subscribers and an ever-increasing Internet penetration, the channels to create effective fulfillment models are real.

Some of the hottest technologies we see are in Wireless apps around security, IT and BPO businesses around RIM, and Cloud computing. Big opportunities are there around financial inclusion and the entire payments space across multiple channels. The ability of a framer to invest his surplus in mutual funds using his mobile is real. If executed well, the industry gets a potential 750 million customer base. Imagine the impact on the capital markets and ensuing wealth creation. Healthcare ideas are around diagnostics and medical services (general and specialized) network creation. Provisioning tele-radiology solutions and creating robust health information systems that drive speed, accuracy, and timeliness are among the emerging themes. Some of the core, under-penetrated sectors will grow 5-10x of GDP growth. The opportunity is real and it is time to put money to work. Several business models are fragmented and sometimes broken. Creating effective market places that eventually de-clog the supply chain and reduce the levels of intermediation are some of the key elements we look for in potential investment targets. We have seen the trends and points of inflexion in the US and more recently in China. Every $50 increase in per capita income will create a multiplier effect on size and scale of businesses that will benefit from higher disposable incomes.

Our advice to entrepreneurs is simple - Think big or go home. You have to be tenacious and stay spirited through the journey, which more often than not is turbulent and fraught with risks.

The author is Managing Director India, Walden International
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