India: Can the Tiger Economy Continue to Run?

Transcription

1 India: Can the Tiger Economy Continue to Run?

2 India s GDP is on the rise US$ trillions Nominal GDP (left axis) GDP growth (right axis) % Source: International Monetary Fund.

3 India s GDP per capita keeps growing Source: International Monetary Fund.

4 India s share of world GDP is rising % GDP based on purchasing-power-parity share of world total Source: International Monetary Fund.

5 Thousands India s international trade US$ billions Exports Imports Source: Reserve Bank of India.

6 India s current-account balance US$ billions Current-account balance (left axis) % of GDP (right axis) Source: International Monetary Fund. Percent

7 India tightens monetary policy in fear of inflation Target interest rates of the central bank Policy interest rates, percent Russia Brazil 8 China India Source: Bloomberg.

8 India s population is catching up with China s Billions Population trends of India and China India China Source: International Monetary Fund.

9 India has large young population Age Millions India China United States 150 United Kingdom * 2015* * estimated Source: United Nations.

10 India s high-technology exports have significantly increased US$ billions 12 High-technology exports 10 High-technology exports (% of manufactured exports) % Source: World Bank.

11 Industries contribution to India s GDP Source: World Bank.

12 Foreign direct investment in India on the rise US$ billions 45 Foreign direct investment, net inflows (left axis) 40 % of GDP (right axis) % Source: World Bank.

13 India s market capitalization surges US$ trillions % Market capitalization of listed companies 1.4 % of GDP Source: World Bank.

14 India s electricity shortage in Energy(MU) Peak(MW) Requirement 777, ,809 Availability 691,038 96,785 Shortage 86,001 13,024 Shortage(percent) Source: Central Electricity Authority, Government of India.

15 Existing infrastructure in India 2009 Length of roads(kilometers) 3,516,452 Main roads(kilometers) 666,452 Paved roads(percent) 47 Access to all-season-roads(percent) 61 Road density(kilometers/1000 sq. kilometers) 1,115 Rail track length(kilometers) 63,327 Number of ports 199 Turnaround time(days) 3 Airports 125 International airports 11 Sources: Government of India, World Bank.

16 Investment requirements in infrastructure Sector US$ billions Transportation Roads Railways Ports Airports 9-11 Power and other sectors Total Sources: Government of India, World Bank.

17 India relies heavily on rural roads India's road network Expressways 0.1% National highways 2% State highways 4% Major district roads 14% Rural roads 80% Source: World Bank.

18 Working-age population grows rapidly in India Over the next 10 years, India will add over 5 workers for every 1 worker added by China... Addition to working-age population (in millions) with the world s largest addition of people to the workforce, it is estimated that over 100 million households will join the middle class Number of Indian households (in millions) % by annual income India Latin America Wealthy Middle class China U.S. Japan -8 Europe Aspiring middle class Impoverished Source: Morgan Stanley.

19 Size of capital markets relative to GDP 2010 Percent of GDP Securitized loans Bank loans Private bonds Public bonds Stock market capitalization U.S. Japan Western Europe Middle Other developed China India East and Africa Other Asia Latin CEE and America CIS* * Central and Eastern Europe and Commonwealth of Independent States Source: McKinsey Global Institute. Emerging markets

20 Investment rates have increased across all emerging market regions since 2000 Investment, percent of GDP Africa n.a Eastern Europe Latin America Emerging Asia excluding China and India n.a China India Other emerging countries Source: McKinsey Global Institute.

21 High investment rates in China and India Investment, percent of GDP China India Other emerging countries Source: McKinsey Global Institute.

22 Percent of surveyed managers reporting business constraints Source: World Bank. Indicators China India Corruption Courts 25 3 Crime Procedures for business start-up (percent of GNI per capita) 9 74 Labor regulations 21 9 Tax rates Policy uncertainty 33 9 Rigidity of employment index (0 = less rigid to 100 = more rigid) 24 41

23 Quality of life 2008 Indicators China India Access to improved water source (percent of population) 89* 88* Access to improved water source (percent of urban population) Access to improved sanitation facilities (percent of urban population) Carbon dioxide emission (metric tons per capita) HIV prevalence (percent of ages 15-49) 0.1** 0.3 Incidence of tuberculosis (per 100,000 people) Source: World Bank. * 2007 ** 2009

24 Corruption Index 2010 Source: Transparency International. Rank Country Score 1 Denmark New Zealand Singapore Finland Sweden Canada Netherlands Australia Switzerland Norway United Kingdom United States China India = Low 0 = High

25 Sanjay Patel slides

26 India is one of the fastest growing economies in the world Average annual real GDP grow th rate ( ) 16%CAGR in value of 11.2% BSE over the same 8.6% period 3.4% 4.4% 0.9% 0.3% Source: IMF. China India Russia Brazil U.S. U.K.

27 May-01 Mar-02 Jan-03 Nov-03 Sep-04 Jul-05 May-06 Mar-07 Jan-08 Nov-08 Sep-09 Jul-10 However, Indian markets trade at expensive multiples 36.0x Historical P/E trend of BSE x 24.0x 18.0x 12.0x Avg: 19.4x 6.0x 0.0x Source: CapitalIQ; as of January 1, 2011.

28 Most businesses are family-run, dominated by a Promoter Top 500 publicly listed companies (by ownership) 14% 76% 1% 9% Family Controlled Businesses Public Sector Undertakings Multi-National Corporations Pure Professional Firms Source: ASK Investment Managers, Capital Line. Note: Top 500 publicly listed companies as per market cap., excluding 46 banks and financial institutions (as of March 31, 2011).

29 Performance of share price since issue Primary issues in India have underperformed the market 0% % -20% -30% -40% Number of issues -50% Simple Average Source: Bloomberg. Note: Figures represent a simple average of the difference between issue price and current market price; Chart shows performance of 459 issues between 2006 and Number of Issues 0

30 PIPE deals in the Indian markets are at significant premiums Valuations of PIPE deals in the Indian markets ( )# 22.7% 19.3% 17.5x 14.9x Mean Median Premium on 6-Month Average Price Source: Venture Intelligence, Capitaline, Stock Exchange Filings, Bloomberg. Note: Data for PIPE transactions from 2007, above 5% stake and above $20 million. Mean EV/EBITDA Multiple Median

31 There is a high degree of leverage in Indian companies Total Debt based on Debt/EBITDA of a sample of 1,050 companies 5x-8x $68.5 billion 8x+ $41.7 billion 0x-3x $60.5 billion 3x-5x $64.8 billion Source: CapitalIQ. Note: Companies listed on the BSE with market cap. greater than $1 million; excludes banks and financial institutions, companies with negative EBITDA, LFY numbers for Debt and EBITDA.

32 Fifteen years of Global Conference Join us in 2012 for a milestone anniversary April 29 May 2 Los Angeles