JPMorgan India Investor Summit: Expect Heightened Investor Interest In India, Says Kaustubh Kulkarni

Indian equity offers the possibility of creating alpha and sees substantially heightened investor interest for the next two years, according to JPMorgan's Kaustubh Kulkarni.

"In 2022, you had both, the Russia development, and also the Fed tightening, as we call it, so whenever you have a major spike in interest rates, normally, emerging markets' equity performance takes a hit," Kulkarni, senior country officer, JPMorgan India, told BQ Prime on the sidelines of the JPMorgan India Investor Summit.

"If you are an emerging market equity investor, most of them did struggle because they had poor performance last year. The only thing that reduced the poor performance is exposure to India," he said, further stating India has been the best performing emerging market for the same reason.

"This year, and I would say for the next two-three years, till some of these macro themes remain the way they are, you will see substantially heightened investor interest in India," he said.

Investors are quite keen to understand the China+1 strategy, and the implication it has for the export oriented manufacturing companies, according to Kulkarni. Companies are in a much better position to benefit, as compared to new companies or Fortune 500 companies that do not have an existing manufacturing presence, he said.

"We see the primary green-shoots or advanced capex plans coming from these segments—a number of them almost investing 100% Ebitda that they're generating this year and the next two to three years in the next phase of capex," he said.

"There is a lot more visibility on the business models for some of the fintechs, which the market did not have less than 24 months ago or even 18 months ago," Kulkarni said.

"The second thing is, in banking in India, both public sector and private sector banks have embraced digitisation, and they are also actively starting to talk about their own journey on digital financial inclusion and how they're driving the business."

There is expectation for a large amount of value to be created in credit origination, distribution, and holding model, as well as in asset and wealth management, according to him.

"As India grows, this wealth that is going to be created across all sort of income streams of people, ultimately needs to be managed in a very efficient manner. But more importantly, the digital avatar of how asset and wealth management services are offered to customers, given the massive growth in the assets that will take place," Kulkarni said.

"The total deal volume is $100 billion for M&A in India. We definitely think this $100 billion can get to $150 billion, so 50% higher in the next three to four years," Kulkarni said.

"Part of it comes to a number of families who are in the second and third generation of their businesses, listed or private, in whichever manner, are thinking through what is the best way they want to be involved, or not involved," he said.

The second important driver for mergers and acquisitions is an expected rise in government-led investment in public infrastructure, where there's a big advantage to scale and having better cost of capital compared to others, making consolidation a natural corollary, Kulkarni said.

"The third one is a number of IT services and other services companies including healthcare services are owned by private equity, so the moment you see private equity being an important owner of assets, given their finite life in which they organise their own funds, M&A will be an important consideration for them."