/India offers ‘compelling investment opportunities’ says Canadian pension fund CEO Mark Machin

India offers ‘compelling investment opportunities’ says Canadian pension fund CEO Mark Machin

MUMBAI: Canadian pension funds are expected to increase their India allocation significantly in the next few years as the country offers many ‘compelling’ investment opportunities, says Mark Machin, president of Canadian Pension Plan Investment Board(CPPIB).

Speaking at an event organised by industry lobby group FICCI, Machin added that India would need specialist investors/lenders who can focus on medium scale industries so that the Indian economy grows at full throttle.

“Our focus on India is only going increase in the next few years as we plan to shift our one-third of our assets to emerging markets,” Machin said adding “ Strong domestic consumption and India’s emerging technology sector are key positives for the Indian economic,”

However, Machin emphasised on the need of scaling up the medium scale enterprises where India seems to be lagging. “Historically corporate governance has been a key issue for the smaller companies. In this regard, we welcome the steps being taken by Indian government and regulators to ensure better transparency,”

Michael Fernandes, partner, Leapfrog Investments too made a similar point in the discussion. “India needs to figure out a way to unlock the credit flows into second tier companies,” he said. Commenting on India’s non-banking financial services (NBFCs), Michael said “Indian NBFCs are in no man’s land as they are increasingly depending on bank capital after institutional investors such as mutual funds have turned cautious while lending to them,”

Speaking in the same panel, Ashwani Bhatia, managing director of State Bank of India(SBI) said there was no shortage of capital for expansion. However, he added that special measures would have to be undertaken to ensure that even medium scale enterprises – the ones which often don’t enjoy top notch credit rating – get access to growth capital.

“We are flush with liquidity currently, but suitable opportunities are not there currently,” Bhatia said. “This is due to low capacity utilization currently. However, things will improve as we move forward,”

Sanjay Nayyar, chief executive officer of private equity fund KKR India said we need to look more inwards for capital. “We cannot build an economy purely on the basis of foreign capital. There should be an alternate local pool of capital. For instance, we should have more local sovereign funds targeting the small and medium enterprises (SME) sector,”

ICICI Lombard’s chief executive officer Bharghav Dasgupta too emphasized on the need for building local capital. He opined India’s bond markets should be opened up for greater retail participation and the government should also come out with special incentives for such investments.

“Unlike equity markets, bonds markets in India are largely dominated by institutional investors such as banks and mutual funds. Also, it is a more skewed market due to lack of depth and transparency in terms of pricing,” Dasgupta said.

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