Mumbai According to veteran investment banker Ajay Garg, who is also the founder and managing director of Equirus Capital, India is expected to outperform other emerging economies in the private and public markets despite the fear of a global slowdown and domestic adversities. Edited excerpt:
What do you think are the opportunities in the current scenario where a global recession seems imminent?
First, at the domestic level, we do not think the inflation situation is as out of control or as alarming as the global environment. We are about 1% above our external target range compared to the developed world, which is 6-7% above our target. Second, our central bank need not be as aggressive as developed countries. Third, our recovery appears to be strengthening. Although we may see some temporary softening, it will be the highest in the world. Fourth, our political system is stable and is expected to remain so for the foreseeable future, which highlights the potential for meaningful reforms in the long term. Fifth, global rating agencies have reaffirmed our rating on investment grade, and there is no previously envisaged rating threat. Overall, I would conclude that there are a lot of opportunities, especially given that India wants to carve itself out as a manufacturing destination. India remains an attractive investment destination, and when the dust settles, we think there will be a meaningful inflow of capital into India.
Do you see the corporate sector changing its capital expenditure plans as it faces a slowdown in the West?
India’s capital expenditure is governed by the strength of its domestic consumption and to some extent by global demand. Having said that, there are two structural shifts in global manufacturing – higher energy costs in Europe and disruption in Eastern Europe, and global corporations are looking to work with the China Plus strategy. When the last disruption happened, India and Indian companies were not ready, but now that the government’s focus is on the scale of Indian companies, we think they will benefit greatly. At this point, capacity utilization is still modest at 72.4% (December 2021), but has improved from the low of 47.3% seen in June 2020. After the global financial crisis, capacity utilization reached 80-83% between 2010-2011, when India’s growth recovery was strong.
Valuations in the listed space have moderated significantly. Will this affect private markets?
Private market deals were dominated by digital economy funding to create the next unicorn, as some of the stocks listed there have a serious correction – the impact here will be severe, and a new valuation matrix for the space will emerge. , In all other areas, we have not seen such a profound improvement as we saw in most of the IPOs we did last year. So we don’t see much impact on the private market.
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