INVESTOR INTEREST IN INDIA REMAINS STRONG

24 June 2011

Investor interest in India remains strong

Click here to download a full version of our report

24 June 2011, Mumbai, India - The London Stock Exchange and Capital MSL, the international corporate and financial communications consultancy, today unveiled the results of a research study of international institutional investor attitudes to investing in India and Indian companies. The survey, which was conducted in recent weeks, researched the views of fund managers from 30 blue chip institutions in the UK and Europe that invest in emerging markets.

This research was conducted ahead of two major conferences last week in Mumbai and New Delhi for Indian companies interested in understanding how to raise capital domestically and abroad. The conferences were hosted by the London Stock Exchange in conjunction with leading practitioners in their respective fields: Amarchand Mangaldas, Arden Partners, Capital MSL, Citigroup, Ernst & Young, Kotak Investment Banking and Linklaters.

The key findings of the research are

• 23% of participants gave India and Brazil the most positive ratings [1] as an investment destination relative to their emerging market peers, with China in third place with 20%.
• The overwhelming majority of investors remain confident in the Indian growth story in the longer term, with 73% of investors very confident in respect of India's outlook in 12-18 months time. However, the short term picture is less positive, with only 5% of respondents being very confident of the picture for the next 6 months, pointing to concerns over the inflation outlook and interest rates.
• Investors believe that despite these issues, Indian corporates will continue to perform well and record strong growth.
• When looking at India as an investment destination, 17% of investors cited inflation and corporate valuation as the most important investment criteria, with GDP growth and regulation cited by 14% and 11% of investors respectively.
• Consumer industries (14% of top ratings), financial services (12%), infrastructure (11%) and technology (9%) were highlighted as the most attractive sectors, although power (7%) and renewable energy (7%), if combined, would have ranked joint first.
• Investors cited corporate governance (15% of top ratings), disclosure (15%) and transparency (15%) as the most important considerations when making an investment decision in an Indian company. This is followed closely by management access (14%), regulation (13%) and liquidity (12%).
• 67% of investors said that a one to three year period is the preferred term for holding investments. This was usually determined by a combination of factors, including investment policy, long term return potential and tax considerations. However, 29% said their time horizon was in excess of three years.
• 46% of those surveyed access the Indian market through the domestic exchange due to the liquidity available. However, a number cited regulatory constraints as a hindrance, and 24% of respondents prefer to invest through the London Stock Exchange and a further 24% through depositary receipts and / or participatory notes.

Nick Bastin, Director at Capital MSL commented on the research: "The Indian growth story is well understood, and undoubtedly there is increased liquidity flowing towards India and its corporate marketplace, which looks set to continue in the medium to long term. However, there is also increasing competition in India to attract this capital, and discerning investors have more investment choice than ever before. Corporate governance, disclosure, transparency and best practise financial communications are seen by investors as key requirements. There is no doubt that those Indian companies that can demonstrate good stewardship in these areas will stand out from the crowd, reduce the cost of capital, and secure loyal and long term investors."

Commenting on the findings Ibukun Adebayo, Head of Primary Markets for India at the London Stock Exchange said: "While short-term investor sentiment is by definition up and down in nature, the survey is emphatic that the medium and long term sentiment for India remains strong. This is backed up by the fact that Indian securities are mostly held for longer periods; as investment rather than speculative buys. All of this bodes well for moderately leveraged & well run Indian companies with a good story that are planning overseas capital raisings in the near future."

-Ends-