 session. My name is Alok Shursagar. I'm a senior partner with McKinsey & Company. We're privileged to have a very distinguished and interesting group of panelists, as you can tell, from the profiles. And we hope to have a very specific discussion on the issue of solutions to restoring investor confidence. I think we've spent a lot of time in the last day or so talking about all the issues, the need for reboot and all of the issues associated with that. Today we will spend this session focusing quite a lot on what are the specific actions that have been taken and can be taken. And all of us on the panel are going to be quite clear in providing examples rather than theory as a way to make this discussion come alive. So even as you think about the questions or the contributions you want to make towards the end, let's try and make this as granular and specific as possible. So in that context, rather than opening statements, I think we've agreed as a panel that we're going to actually go through some very specific questions based on everyone's background as a way to do a quick round of opening statements. I'll then follow up with another round of questions based on those statements and then do two or three rounds like that and then open up for questions from all of you to sort of round out the last 15 minutes. So with that in mind, Neeraj, you've obviously looked at various Indian companies at this early stage, mid stage, late stage. When you have examined whether to invest in an Indian company, what has distinguished those that have given you confidence or the ability to manage risks in the Indian environment? Thank you. So maybe just to address it, I'll just talk a bit about private equity in India and how one views investments and then talk a bit more about specific risk profiles. So private equity in India has by and large disappointed so far. It came of scale in 06, 07. No one's actually, funds have not really made money in India so far and LP's by and large are quite disenchanted with the returns they've got from their India investments. I think the reason the market has been tougher for most funds in India is multi-fold. The main reasons one is this market is characterized by higher valuations as partly because private equity or funding, private funding, institutional funding came of scale ahead of the maturity of the market. I think secondly it's been dominated by public investments, which most investors believe they can do themselves without having recourse to private equity. And I think the third is the Indian world is somewhat more of a unique beast compared to US or European management teams. There's a stronger sense of control around the business. There's definitely a sense that they don't want to let go. And within that context the question is why isn't there positive, right? I think from a private equity or an investing perspective, one is the growth in the economy. Whether you take 5 or 6% or 7% the fact is within that you'll find companies which are growing at 2 or 3 times. 15 to 20% growth allows you to create sizable enterprises, allows you a lot of margin for error as well within these businesses if your management teams are not executing. I think secondly in India because the promoters own such a large ownership stake in their companies, the alignment is much higher than what you find in the US as an example where CEO might own less than 5% of a company. And then the third thing is I think Indian businesses by and large have figured out how to sweat their assets a lot more. So that translates into higher return of equity, higher return of assets in the market. So I think that's sort of the macro perspective on private equity investing in India. I think on specific investments, at least we look for one of the overall growth profile of a company which you can from reported financial statements, operating metrics. Secondly in India specifically we put a lot of emphasis on corporate governance. That for us is in terms of the general reputation of a business family, the fact that they've dealt with their partners, possibly in the past is a very important facet of what we look for in our deals. And thirdly, sort of a realistic picture of how this business might transform in the next three to five years. A lot of people have very extravagant plans about how the businesses can be built. That doesn't necessarily create private equity shareholder value with someone who has a more methodical plan for how they're building this. Thank you, Neeraj. Joseph, you're an example of someone who's built a business from scratch and created markets from scratch at MCX in the commodities and futures marketplace. Perhaps could you talk about the journey of in building that marketplace? How have you managed the risks along the way and created returns for your investors? Yeah, I think it all began with a single policy decision that, you know, India must have markets. And that policy decision not only created markets, but much greater penetration through the support system that we created. So A, I think the key message is even if a small decision is taken by the government on policy front to say a sector is important or initiative is important, it creates much greater, you know, business opportunity around that sector. What we did was we probably two things that were required was technology and domain and that was our core. So we took this decision that we will actually create a market and we will look at, you know, there were two constituencies, constituencies which are going global. They were participating in these markets was globally. So how could we give them a competitive market so that they can trade in local currency in local time? Secondly, they had reasons to go out and so they were doing it in the evening session. So we created an evening market. So we kind of replicated the global market by giving them that time, that cost, that technology. And we kind of made it difficult for them to take a decision not to participate here and go out. We got unique people inside and where we had to spend a whole lot of money on education. So because these are people who didn't understand technology, didn't understand marketplace as clearly and we had to actually go and build, brick by brick build, you know, understanding amongst these people how the markets operate. Third important thing that we did was, you know, when we could look at a bird's eye view, we knew that nearly explaining market was not sufficient. They needed a whole lot of support which one point of view we could have taken is that this support had to come from the government institution and we could have held back ourselves and said let the market mature in their own piece of time. What we did was we actually proactively went and created those businesses. And so while the warehousing regulator came much later, we ended up creating a whole lot of warehousing space, space for spot market, space for education and they were, these are all independent businesses having on their own but actually created for the purpose of supporting this market. So we actually looked at the value chain perspective and created everything else. Logically, we moved in now ahead of stock exchange and we said having penetrated the country, what else does the country need? They need financial services. So now we are setting up the stock exchange on the same value chain we will go and spread this financial value chain. We've got the best of the class investors in the promoting exchange now it's a listed enterprise and the stock exchange is relatively new. We are operating for four years in currency and we will be starting stock shopping. But I think that's a short story. We've managed to integrate the banks, the foreign players and the large domestic market. Thank you Joseph. This theme of building out the value chain is obviously an important element of building out a successful hotels and hospitality business in India as well. Basant, as you think about India relative to your other emerging market investments, what are some things that have worked for you in terms of building the local partnerships of the supply chains and any thoughts in terms of how you think about investments in India relative to other markets for Starwood? Sure. I mean from a hotel standpoint, a statistic that you may or may not know is it is the most under-hotel market in the world and one of the statistics that's often thrown around is there are as many hotel rooms in all of India as there are in New York City. So the opportunity is vast. The other thing about hotels is that it is a phenomenal business for what India is trying to do. It's a tremendous job creator, first as a construction job opportunity and then as a service sector job opportunity. You don't need a big education to work in the hotel business as you know you need to have the willingness to work hard. You have to have some inclination to work with people. And then any modern economy, when I was growing up in India there was a view that five star hotels are the playgrounds of the rich. Most of you who travel on business know that there's nothing very glamorous about business travel. 75% of our business is all about business travel. Hotels are the lifeblood of any modern economy. You have to allow people to get around if you're going to do business. And then there are a major source of money. People visiting the country spending money and creating jobs as well as just the integral part of infrastructure. If you're going to build roads and airports you need hotels. So on a variety of fronts this is in our view the third largest market in the world. Our largest market is the US, China is our second largest market today. This isn't the third largest market but should be. The issues of course are that they're fairly similar to the issues you have in anything to do with infrastructure. Things move slowly. Land acquisition is hard. The permitting process etc. Our business model is adapted to work in all parts of the world because you can't be good at real estate in Shanghai and Mumbai at the same time. So our business model is to work with local partners. So we work with people who are in the real estate business who acquire the land or have the land build a hotel and we run the business for them. That business model generally works well in most parts of the world and the important part there is finding the right people to partner with. The issue for us of course has been that things have not moved as fast as we would like for a variety of reasons but they're moving. The opportunity remains quite substantial steadily as you all know the stock of better quality hotels is growing in India. By way of comparison we have today over 100 hotels open under our brands in China with another 100 under construction in India where about a third of that and probably about another third under construction. So on a scale basis it's well on its way to being an important market but slower than we would like. Tiger you have the distinction of having built effectively a global company from India and as you now reflect upon the experience of perhaps 5 or 10 years ago persuading people why they should continue to invest in your India operations to now a perspective where you're probably now making decisions between India and other markets to invest in. Could you perhaps talk us through how you've made those decisions a few years ago versus now giving you a different vantage point. So I think if we dialed the clock back 15 years back for the type of business we were in there was no option at the same time all the infrastructure issues etc that I think Vasanth referred to were there so the only way we dealt with it was actually looked at the supply chain and said we will create and manage the supply chain ourselves whether it's transport power roads keeping the roads the way they should be in order to make sure the transport actually works everything we took over ourselves. Now that model works up to a point because as costs rise your efficiency of running at yourself declines and then at the same time as time passed by that happened other markets also started rising whether it's Philippines or it's other Southeast Asian countries or Latin American countries that can deal with the US for some of the work that we need to do etc and over time actually some of the work being done in markets in the US itself or US and when you have the cost structure change plus you have the issue of not being able to bring talent in fast enough scale enough to be able to do the work without having to train them again you start changing the cost equation so that has changed it's not changed to a point where actually India is unattractive I think it's hugely attractive the higher the value chain of the work the more attractive it is which is great but I think there are more choices that we make there are more choices that clients make interestingly the choice is less about India once you decide you want to get here it's more about the micro segment of India which city which sub segment of which city which state what type of work so once you decide it's India then the decision is exactly which granular segment of India however the reverse is not true which is if there is a shadow on India then it kind of clouds everything and I would classify the last one as you know kind of a shadow on many things whether it's two power outages that you know cut off power one third of the country you have people saying wow you know I don't care how good it is in one micro segment I'm just not interested so I would say the risk return equation of investment is when you have a negative it kind of clouds everything when you have a positive it doesn't it doesn't make everything positive it's the micro segment that becomes positive just building on that point think about this idea of the micro segments that's been a theme that please we've also seen in many markets it's not really the market with the segment how do you look at this when you look at companies that operate across multiple emerging markets and any implications as we go back to the overall theme of how to improve India's investor confidence actually I mean you know just to put things into a broader perspective you know from my role as an academic is that the in terms of investment coming into India FDI is much much more important than FII while clearly both are important FDI creates more jobs affects you know the country longer term it's more sticky money etc but even more important perhaps than that is that FDI is really let's say quote unquote smart money it's not just money it brings technology organizational capability global connections and so on etc and I think if I look at FDI and you know as professors you know we of course have to give grades and you look at you know various components of a quote unquote students performance that when I look at India's FDI performance across many dimensions the best grade that one could give would be a C you know and so just to put some numbers you know behind that is that you know we know the first half of 2012 you know FDI figures for India 1% versus global you know minus about 9 or 10% even global emerging markets minus 10% India minus 43% but actually if you take a 3 or 4 year perspective is that you know FDI to GDP inbound FDI to GDP flows into India 2008 was 3.38% then you know going on year by year 2.63% 1.41% 1.63% so it's been declining 1.5% to our GDP if we compare India to other you know peer group China, Indonesia, Brazil you know which are all relevant peer or of course the worldwide is that India's FDI flow in flows to GDP 2011 for example are 1.63% worldwide 2.2 China 1.76 Indonesia 2.23 Brazil 2.76 you know and so if we compare India historically last 5 years we look at India this year we look at India to world we look at India to peer countries we look at India's FDI to GDP you look at any number the best grade that one could give would be to a C so then the question is what could one do about it you know what's causing it and what one could do about it and I think I would start by you know strongly reinforcing what Tiger just said is that the India brand does matter a whole lot you know when I talk to companies and just you know over the last couple of months you know senior executives of you know kind of the fortune 50 multinationals and when I talk to them so for instance you know the very large multinational about 50 billion in revenue the global head of emerging markets and this person is based in Shanghai so and you know he's been based in Shanghai and he comes to India you know multiple times a year etc he knows India but he said look you know I know India and I understand deeply what's going on what the opportunities are what the risks are and so on but I myself cannot make the decision I ultimately have to sell to the corporate executive committee and at that level the depth of understanding about India individual sectors local markets is still relatively and so therefore the executive who's championing the decision may be very senior maybe a member of the worldwide corporate executive committee but he or she still has to sell to his colleagues and at that level brand image matters and so you know Tiger's point but and it's only after a macro openness willingness to say yeah it's time to invest in India then the micro thinks about where in India in which segment in India etc begin to become more important and I think over the last two three years the India brand has taken a serious beating and you know and whether it's you know as you said in the news about you know 600 million people without power you know and that doesn't you know go very well and so the over you know over the last two or three months many executives have been asking me you know because I look at the emerging markets across the board so what do you think you know should we be investing in India or should we be focusing on Brazil or should we be focusing on Indonesia or China you know those are the kinds of questions that people are beginning to ask of course you know my answer is why do you have to make a trade off because are you going to invest in Germany or in Germany is the strongest but even then look at the growth rate are you going to invest in the US so to that extent you have to focus on emerging markets but companies are asking this question that's the FDI point is a very important point and I'll speak to it from the other side because for the last 20 years I've been mostly in American multinationals and on the other end of the decision of where to invest and I've seen these decisions being made in the Kola business, the snack food business, the fast food business and now the hotel business and you know the thing about FDI and I don't know whether this audience includes government officials and all that FDI is the best kind of capital you can get many of you know that it is very patient capital and every time I was involved in these decisions they were made with 40 year time horizons these are companies that have been around for 100 years many of them they expect to be around another 100 years and they believe that being number one or number two in India is important to that 40 year time horizons far better than FII which is hot money you know the second thing about FDI is it's cheap capital you know most of these companies are cash rich their home markets the US or Europe are cash generators they have to find ways to invest the cash and grow their businesses and the cost of capital is fairly low relative to local companies the third is it's as you said smart money they don't just come with money like FII does they come with skills they are here to build businesses and create jobs I have a somewhat more optimistic view about that whole side of things as it relates to India in that they're willing to put up with a lot to be in India and you know because of the long time horizons at least the companies I've been involved in it doesn't matter about you know a power outage that happened or whatever they're looking at the very long term and the opportunity the market offers so India always wins when it comes in term when it comes to size growth etc I think the issue has always been it has always thwarted people's ambitions because of the difficulty of doing business the time it takes to get things done the difficulty of doing certain things depending on the nature of your business meaning the bottlenecks that come from the things the government is supposed to do in most countries it is understood that the government provides you know a basic level of education a level of infrastructure you know it doesn't happen those are the problems having said that I don't see any multinational that I've been associated with giving up on India or ever giving up on India because you can't if you expect to be in business a hundred years from now unless you think something is going to go drastically wrong you have to have sizable businesses in China, India and several other markets the problem is that over the 20 years that I've been involved in these decisions companies have alternatives and they want to you know they're not just going to sit there they're going to go where they can get things done and India always loses out because it's harder to get things done that's you know I think that's the problem that has to be solved because India has a lot of other things going for it. Talking about getting things done Nira just you think about your companies that you've invested in over the years what are some examples of how people have got things done in India that could be replicated so whether it's in terms of developing skills their own local infrastructure that Tiger talked about so give us some examples of that to get to Vasant's point on what can be done and what has been done Sure just maybe one point on what Vasant was talking about I think actually even from a private equity perspective India is a very attractive destination today I don't think we could take the hundred year view because the compounded IRR over a hundred years would be abysmally low but I think from a private equity perspective you know valuations have come down today India still you know the index is trading at about 13 times P.E. for a market that last year had earnings growth of 14% and historically has been a return of equity of 18 to 20% so now the risk return is coming a bit more into alignment at least on the pure financial metrics and I think secondly public market fundraising in India due to the volatility both in India as well as global macro has limited the ability of companies to go out to the public markets and raise capital so private equity has been more dominant so I think you'll actually see very good private equity deals being done in the next couple of years and I think with that statement I just enjoy my I'll create job security for myself at least for the next two to three years I think on specific on with the investments I've made in India one is what the point that Tiger actually made I think for the good companies here you actually try to both forward and backward integrate so you know in the value chain right so as I take an example of a deal Apollo hospitals is an example you know for them it was the sort of nursing talent getting doctors and given the churn they have not just they have but hospitals have an India that was the key requirement for them so they actually started they started developing their own nursing colleges and I think that you know being able to captive have a captive source of talent in India is very very important if you look at the scale of the company like Apollo is growing at 25-30% and you and you look at the build out of beds they're doing you really need a large pool of physicians and nurses they can tap tap into I think having a captive source of talent and that specific example was very important I think the best Indian companies I've invested in have also actually gone towards the sort of western principle of being staying focused. They've placed best beds across adjacent markets which are paid dividends so if you take once again taking the example of Apollo they obviously best known for their hospital business they're in but they also own a very large retail pharmacy business they own a healthcare they used to own a healthcare BPO business they've got a health insurance business so they were playing in adjacencies where they were able to leverage their management talent pool as well as the network and the connections they have had in place I think those are the two things we stand out when I look at the best deal which I've done in India where I see other my competitors and the best deals they've done I think it really comes back to A having a captive source of talent and that could go back to Tiger's point around infrastructure as well and the second is playing in adjacent markets. So I can just connect one point between what Vasan said and what Neeraj said I think the mistake people could make is to underestimate the importance of certainty in building a 40 year financial model. I completely agree with Vasan saying people do take long term views when they look at markets like India. The problem is if you have uncertainty it's okay to have cost and I think it's very important to understand it. It's okay to have a policy that comes out say this is extra cost of whatever tax this that whatever but tell us what it is because then I can build my financial model and make my risk return work. If you're not going to tell me that and on top of that if you're going to keep moving back and forth including retrograde I can't build a 40 year model. I'd like to build a 40 year model I'd like to take a lower return and still I'll find India attractive. That's the bigger issue. So it's indecisiveness and it's uncertainty and it's actually in some cases as we all know retrograde. Joseph, you've had to live the world of uncertainty in regulation whether or not you could even become a stock exchange what are some things that you learned through that experience to what Tiger was saying so you've had to live in a volatile uncertain environment in your own business what have you done to push through it? I don't think the example that would be very encouraging but must tell you how we are talking growth which is known to everyone. I mean I would go back to my earlier example of that commodity change. When investors came in they all knew that in the finite time period they would like to exit so you know this thing was important you know there are too many micro policies which govern an enterprise so you know we begin by saying reforms, reforms will be major decisions but then when those major decisions are being implemented in the grass there are a lot of bottlenecks which are micro in nature which would emerge not from that sector regulator or from the relevant ministry but from a whole lot of areas where you are dependent on as an enterprise. So taking the example that you know that exchange had to list so there was a listing policy that was required that was actually happening in three years to seven long years. Investors came in they thought there were two segments of the market there's futures, there's options options for ten years you know we're debating and that legislation is still to be approved. So we are saying that you know I think I take from the queue from what everyone is saying that when you look at a broad spectrum any sector you say the sector looks very attractive from the you know matrix that you would draw in terms of how much of demand will be there, how much can it pay off and things like that and when it gets into execution there will be so many nuts and bolts these can't be built into your model for simple reason many of these things are treated as given and you would encounter them when you're actually implementing it. Now somehow in the entire system there isn't an arrangement where bottlenecks get identified so major policy decisions will be taken it could be legislative it could be executive. Having taken those broad decisions if there are micro issues which need to get passed there isn't a central agency which says oh this is a bottleneck this bottleneck was removed here ten other sectors benefit and someone should focus on this bottleneck so I think a little bit of element to do with execution and especially when people are talking about China and India I think this is where we are probably losing out. In China they can see everything from value chain perspective that if I take addition that you know X industry should come then I know all the pitfalls and I will worry about all the pitfalls and see that everything is put in place. Here we will say this sector is important but pitfalls will possibly not be part of the policy pitfalls will be encountered will be resolved case to case basis and I think this is where possibly I think all these problems are what highlighted the government is clear that we want employment generation we want growth we want foreign capital. Capital is chasing all this to be achieved. I think the last mile bit of execution possibly from what debate that is happening in the country probably everything has got agile people have understood what the challenges that we've seen an institution now coming up which will ensure that policy execution of major projects will get done. I think we'll find an end to this particular challenge that we are facing. I mean any investment issue and it's case after case I mean there's a power exchange that we've set up in which is based out of Delhi. This power exchange had short term products had long term products. Investors came in after two years this power exchange almost has 90% market share. The long term products are dependent on being executed because there are two regulators with government. Those two regulators can take addition because that addition needs to depend on ministry there are two ministries to deal with. It's been almost three years now I know we're still working through it. So I'm saying these are realistic issues these issues now have been understood and we are now increasingly seeing that the government is worrying about execution which deals with multiple ministry multiple regulators and how should there be an apex body which would resolve it and I think we should have something in place. Anil just to build on that other countries like for example Indonesia I actually spending a lot of time thinking about this administrative simplification. Single windows for decision making so on and so forth to deal with some of the issues Joseph talked about which is we may think a sector is attractive with the micro execution and the administrative decision making is extremely complex. Are there other such examples Anil that you would point to from your own work that would be relevant and helpful to India in terms of how to simplify the administrative complexity of policy. I think that connects with the two or three points I wanted to make about policy and I've come to exactly this question is you know the one thing about when we look at policy is that policy first of course policy may impose costs that's not as bad as policy uncertainty because typically the costs that come with policy would apply to multiple players so may apply to all the players and so in the end those costs get passed on if you will to the customer it's policy uncertainty which hurts really because what companies do investors do both FDI as well as FII but focusing on FDI that when you have uncertainty the hurdle rate goes up and so of course I mean if the hurdle rate goes up it either means no investment or less investment or only investment in the highly attractive projects rather than in a larger chunk of projects. Now in terms of when you have multiple windows rather than a single window that not only imposes costs but the moment you have multiple windows every such window is essentially a degree of freedom okay to the bureaucrats to the politicians and so on and that creates uncertainty you know just like you know if you look at a supply chain you know if you've got 20 links in the supply chain things can go wrong at any point versus you have only one link in the supply chain and so I think the single window yes its benefits are in terms of expediting the whole process and the cost of time that is eliminated but in addition to that I think perhaps an even bigger advantage from a single window approach is the reduction in uncertainty you know you face it once and once you are you know beyond it you know then essentially there's massive uncertainty reduction and to build on that you know you talked about Indonesia China has done that very nicely other countries Malaysia, Ireland you know if you look at countries in our neighborhood so you know that approach has been followed and you know two things I want to say in terms of from a normative point of view is that the first should India and you know the whole idea of special economic zones or the NIMCs and so on etc you know that's been on the table but the you know for instance like what China did so back in 1992 you know in collaboration with the Singapore government one of the first SEZs that was set up was Sujo Industrial Park and so therefore should India, could India set up as a model you know I'm not saying you know you need to do JV for SEZs in 20 places but one of them and let's say as a joint venture with the Singapore government and why not with the Chinese government because China has massive experience and so that will be a huge learning opportunity for India you do it once and the rest you do on your own you don't need JVs for that but the branding implications of that also I think would be very very good so that's one point the second point is that you know if I just reflect on my conversations over the last couple of weeks with the senior executives from some big companies is that the and when they talk about their perspective on FDI in India is that aside from all the policy issues what the restraints or constraints the amount of money that they are able to put in India is the lack of an ecosystem you know from a supply chain point of view now in some cases if it's talent then you know as in the case of GenPact you can invest and you can build that ecosystem but if you are let's say one of the biggest aerospace companies and what you do is build planes and you need of course a you know subsystems and you need components and you know and the company is not going to go into internal manufacturing of the subsystems and components because that's not part of the company's strategy so in India we don't you know so what we exactly were saying okay so the government says okay you know we encourage but encouraging FDI just for our little bit is not enough because the cluster is weak another company or the biggest telecom equipment manufacturers in the world that currently don't do manufacturing in India that would have been looking at doing manufacturing in India and they are doing something but they said we could do a whole lot more if you know that cluster so therefore the policy makers in terms of making the country more attractive to FDI needs to think in terms of policies that are at the cluster level rather than sort of at the micro level you know we want car companies to come out we want an airplane manufacturer to come out we want a telecom equipment manufacturer to come to really we want a whole cluster if you will and players in that cluster to come it's a very powerful point Vasanth you made that point as well in terms of how you think about building out your hotels with local partners to Anil's point what things are you doing or considering to build the clusters the right quality of supply chain that quality of experiences so on and so forth in order to maintain your global brand quality well you know we are putting a lot of infrastructure into India that supports our business so for example we are going to handle all our calls in India instead of sending them outside India which most hotel companies do we have a local call center we have a local sales force a lot of hotel companies will have one global sales force so we have a lot more training on the ground in India so we are laying the groundwork for a very large business in the long run you know there is a decent amount of hotel training that goes on through institutes and all that what we can do is supplement that so you know we don't need the same kind of complex ecosystem that big manufacturing needs our needs are a little different and you know in some ways a little easier to get going but you know going back to the points that I think both Tiger and others have raised is you know given that risk and return is the big item of discussion there is only one thing that I think the single most important thing that could be done is to reduce the uncertainty more than anything else you can talk about all the other problems but businesses can work around them you know if you have uncertainty on cost, uncertainty on time, uncertainty on the legal and regulatory framework where the assumptions you made about the profits you might make are not right that's a killer and that I think in the end is probably the single biggest issue that investing in India entails because your assumptions are wrong far too often on time cost and what the framework is which is not true of almost everywhere else in the world so it is not you know you don't have to go all the way into incredible complexities of we don't have the right infrastructure we don't have this we don't have that many of those things are true but if you took the uncertainty away people will find ways around them as you have so I'll give you one example which is actually a fascinating example it's actually a reasonably recent example of ours so we you know to do something we needed an approval from 12 countries for some of the things that we needed and it was a regulatory approval from 12 countries we submitted it in 12 countries on the same day 11 of them when we submitted it came on the spot and told us 15 days whatever number of days later you will get an answer if it's a yes it's fine if it's a no you will be told that day what you need to do in order to change 7 days so total 21 days it will be yes or no in India when we submitted it we got a we got a stamp back saying received on so and so date so it was confirmed that it is received in fact the time was also stamped but you don't know when you're going to get it back and again I go back to what I think I said I'm going to repeat it which is it's less important as to exactly how much time it takes 28 days is fine tell me it's 28 and 2 I think the importance of time is misunderstood the world is becoming faster cycle times are becoming faster I mean it's everything is speed the importance of speed is I think not fully understood by by almost anyone so and I think that's a big difference in almost going into any emerging market forget developed economies emerging markets today are all competing on speed and I think we are losing competitive edge on speed dramatically at that point around speed are there people who've managed to in certain geographies or local markets get much faster actions done are you seeing real differences between geographies on that I'm just I mean as I think Tiger was referring to you look at some of the stats around India right it's I think the ease of doing business now we're 132 out of 185 countries on the transparency international index which ranks how corrupt a country is where 95 out of 185 I think Bain did some work for the planning commission it takes 150 approvals to set up a business in India so I mean I speed is you know I don't think we're talking about speed here talking about the ability to get something done in India in anyone's conceivable time frame versus I think if you know we have we invest out of an Asia fund and you look at China right their ability to you know we have investments in hotels and budget hotels right the ability with the speed at which they're rolling out is very weak right and and it's both about having a single window clearance it's about having certainty around policy and it's it's it's about having government officials or ministries which are supportive of business right so I've seen it if you look in a we've done a lot of investing in China with a lot of investing in Indonesia and in certain key segments which I don't it's not true for all segments but in certain key segments which are important for the national agenda like healthcare for them like education they're very supportive and actually this whole concert single window investments providing subsidies capital subsidies providing the appropriate management talent is something they do quite aggressively versus you look at the Indian context right I mean I think everyone wants the government to just stay out of the way I don't think you necessarily want the government to support you it'd be great if they can do something supportive but at minimum they should stay out of the way and I think that creates certainty from a policy regime this whole concert of retroactive taxation has got everyone spooked internationally right the fact that you're willing to go back to 1962 and look at what has happened I mean that's admirable in a certain degree but it's also pretty scary I think as long as the government stays out of the way I think there's enough entrepreneurship in India the entrepreneur talent pool is enough and the opportunity is big enough that people will execute but you require certainty and less government involvement okay I'm going to suggest we open it up to the floor for a few questions go ahead specifically on corporate governance and also given FCP and UK bribery act which have long armed jurisdiction which is a great concern to foreign investors how do you do diligence and how do you mitigate around such risks and also regulatory I mean we've all touched upon the point now retrograde a Vodafone being the big and also the 2G scandal which has left a lot of foreign investors burnt and also the image it has to brand India which we talked about earlier so to sort of focus more on that I can take it from a you know we look at a lot from a private equity perspective right actually before I do that I polled 700 of our limited partners who are investors in Carlisle about what was when you mentioned India what were the top 3 things which came to mind and this was in September this is before the spate of policy reforms came through but the top 3 things which they had top of mind for them was slowest growth in 10 years corruption and policy in action so I think when we talk about brand India we should recognize what it stands for today I think you know it's a huge market tremendous potential but I think this is the same story we told 5 years ago we're giving the same story right now and that ties into your point around corporate governance I think in India the perception is being that corporate governance is a win-lose mechanism so the investor coming in will benefit with better corporate governance and the promoter or the company actually loses out if you actually look at the stats around this right which is a lot of work done around this company which are regarded to have better corporate governance, grow faster rates in the peer group investors are willing to pay a premium to get into those companies and actually strategic investors coming in later will pay a premium to buy those companies out so there's a real benefit to improving corporate governance I think from specifically in a private equity world the whole Lilliput scandal has left a big mark on India it's not like this doesn't happen in other geographies there's a very high profile case of a company called Canopy Networks in the US where investors put in $250 million and the company CFO basically took KPMG letterhead and put his financials on that and said these are audited financials so it's not like it doesn't happen but in the Indian context when you have a corporate governance fiasco it just gets that much more profile I think the way we deal with it as private equity investors one is you put a lot of emphasis on the informal networks and the feedback you're getting on companies and generally if that's negative you don't want to work with them we're spending a lot more time on forensic diligence so you know if a company's in retail they claim they're going 20% a year there should be customers coming to the store and buying stuff actually you actually go and check that and thirdly we put a lot of you know like you said you do forensic diligence you get people at control risk to actually make sure there's no red flags which come out and generally if they are red flags they're true so we you know I would tell you in the last since the post-Lilliput world we're spending inordinate amount of time on the forensic side of diligence so if I can just you know push back a little bit on not push back actually you're right on on corporate governance and corruption and integrity and all of that the reality is you know talent and the ability to learn and lead this is one of the best markets in the world forget emerging market so if you can create the culture where it is actually one of the best in terms of integrity governance etc then actually we have found over 15 years that actually you can then take that and use that and implant it into other countries where it actually makes it a comparative advantage in the world so one shouldn't make the assumption that there is something like India corporate governance I think it's specific company corporate governance and then it's a question of can you create it and once you create it it actually becomes a comparative advantage across the world because the ability to then use and standardize processes and the ability to actually drive discipline once it gets incorporated is actually better than many other places FCPA I think is going to become a major factor in investment decisions as it relates to India as a US public company you know boards have significant liability I think the effects of FCPA I don't think I've been fully felt on investment decisions and they will be it will be a major factor in decision making for US public companies where they invest and I think it comes back to the element of unpredictability as a US public company you spend a lot of time building walls around making sure that you are as far away from corruption as you can be because it exists in a lot of places you do business so you put walls around it you need an element of predictability about corruption too the unusual thing about India is we've got the democracy but we've also democratized corruption it's incredibly democratized in India in the sense that it is pervasive how do you put walls around it that creates an element of risk and uncertainty that I don't think has been appreciated yet and will be a massive chill on investment in India it will be a huge factor in our decision just to you know I mean put India in the context of other countries I think of course you know corporate governance doesn't affect FDI decisions as much as it affects private equity and FII decisions but I think on corporate governance while you know clearly India is far from perfect that if I compare India to other emerging markets certainly to China to Indonesia to other markets actually India's corporate governance is better so I'm not too concerned about corporate governance as such in comparison to other emerging markets FCPA that clearly is an issue and it's an issue with respect to India it's a question with respect to virtually every emerging market because they're all competing to be in terms of who can be the most corrupt including China and in China you have command and control in terms of political system but corruption is as democratized in China as it is in India so companies face that issue and when I talk to senior executives of peer companies of people on the panel that there was a time maybe 2005 Jim McGregor he wrote a book about China and there's a thing about corruption he said well I won't tell you what to do but essentially do what you need to do to succeed and donate to charity in your old age but that was 2005 today if companies, American companies in particular similar policies are getting enacted in Europe that if they get caught engaging in corruption in violation of FCPA today the spillover implications globally for the corporate brand aside from you know those are very huge so today you know the guideline that I would give that I hear executives saying is don't not today the final point that you know in terms of despite all the challenges that India faces about FDI that we have discussed is you know actually from the perspective of multinational companies you know India still remains despite all the challenges one of the most attractive markets because virtually everybody believes that okay you have these problems but you look out 2025 and you take a 15 year time frame you know which will be one of the biggest emerging markets it will be one of the five biggest GDP countries and so on etc so therefore this could be India's golden moment you know maybe just to take a contrarian view on this I actually think that the FCPA is catalyzing a lot of change in the supply chain so in the work that we are seeing the fact that you've got FCPA is now forcing people to clean up their business models avoid unnecessary practices and this is actually acting as a good hammer to avoid excuses that this is only the way to do business in India so I think there's a contrarian view to this which actually says that these sorts of actions can help catalyze the degree of change that is necessary in India. Just one more point on that I just I mean I guess why I disagree with the analyst I don't think corporate governance is a relative issue I don't think we can say we're just because we're better than China and Indonesia we're fine I think it's more an absolute and so I think we have to look at it from that perspective I do think FCPA will have a huge impact on companies you're seeing the signs of improvement and I think the point I made is we have to position it as a win-win it shouldn't be positioned as you have to do this so you get you get the investment as a real story for companies to actually adopt better corporate governance. Okay and back here go ahead. I am P.C. Nambiar the chairman of the expert promotion council for special economy zone and the EU is in India you mentioned about the SC set being the you know a trial and error you need not to the SC set is not a new concept in India from 90 plus 40 years government has run seven SCs in this country and a total investment they could achieve is less than 4,000 crores. 2005 the new SCs that I came into being for the last five years of operation he brought more than two lakhs crores of rupees investment in this country now to give you figures 588 SCs have been approved 386 have been notified that means they land in that position and they are planning everything only 161 is operation today because the internal ministerial conflicts the SC set special economy zone which government feels is the baby of the commerce ministry not the finance ministry so first of all government has to be one cannot have two we need to talk about confidence level when you know confidence level you must find out that whether the government is one for the entire nation how are you going to have her splitting in each activity one one department one one ministry why don't I have one common phase now come to exports sir can I just ask is there a question yes sir I'll tell you we made a reference saying that whether the SC set with Singapore or China we can have a collaboration and we can try and after that we can expand you need not to your export performance here is less crores have been achieved last year even April to September this year there is a 36% growth achieved by SC set alone in exports whereas the entire export of the nation is showing a decline so the proven record is that SC set has to be one SC set need not be tried with somebody here is the internal expert is available in her strength is available the government has to make up their mind whether you want it or not as simple as that therefore in some submission we don't have a collaboration we have an internal strength okay thank you very much any other questions sorry this gentleman at the back and then after that hi through the brooch Audrey from Adobe Systems great unanimity on the question of uncertainty and cost among the panelists so the question that I had was in your experiences is this is not something that I think the people in the government possibly aware of the uncertainty cost I think a lot of folks would have raised it with them so in your experiences in dealing with government and having experience with government regulations and policies is the delay primarily because they're trying to over analyze it and trying to get this perfect policy in place or is it an attitude and if it's the first one is it a better idea to kind of get a policy which is a good policy not to get the perfect policy and be agile about it and kind of look at it would like to get you over I think you know you're amongst the two suggestions I would say time is certainly not being valued today and I would agree with the panelists and I think it's one of the if someone could actually do a study we could find out how time could add probably a percentage to GDP so time consciousness is extremely important in terms of whether we get perfect policy or we get clearance I think most of the time something when it becomes an impediment the decision is not on a single table or a single individual and that authority is actually not known at what level is this decision going to be taken so the challenge is everywhere where you are stuck for a bottleneck he would say that he himself is dependent on two other entities so one really does not know where the buck stops and if that clarity was available there was a nodal either ministry or an agency which says bottleneck of three ministries you don't have to talk to three people you just talk to one and I think this is something which industry will never be able to resolve it will have to be resolved by government considering this to be a bottleneck and we want foreign capital to come we want growth to take place we want jobs to be created what is the bottleneck the bottleneck is not demand side bottleneck is also not supply side you know both of them are willing to come I think this constraint of whether we call it uncertainty or to simply say that if you have a pitfall I don't want to put all the factors in my model as of now but if I land up having ten factors which are unknown I know that I'll be getting resolved because that overall mantra is we will make business easy and I think that focus is missing today you know the I'm no expert on this but it seems from watching this you know typically it takes two to three years for a hotel to go from a hole in the ground to a finished hotel in most parts of the world and in some parts it's one to two years in India if you're lucky it's six years and it appears from watching this that there are too many people who can say no and they all have different objectives there is no unified purpose and almost anyone can get in your way if they want to because if you're going to build something as complex as a hotel there are many entities involved they all have the right to get in the way and they choose to and none of them seem to have common objectives you know the interesting thing is you know we work with global corporations to actually fix their processes the reality is lots of companies have the same problem so it can be fixed and it's exactly the two things that the one do you measure it and you consider it important so time and two you know what is the process for taking that decision and who are the people involved and you know is there one owner who drives it through and then gets measured on that decision and it's actually pretty simple thinking that actually corporations use to drive themselves because time is so important yeah of course the irony is that's exactly how companies like GenPAC provide that service other questions my question is a lot of good feedback to the government and I wish we had a government representative on the panel but I would like the panel to reflect on this question is the government cognizant of all this feedback are they doing something about it do you see any change lately are they do they still think that somehow the FDI is inevitable to India some a couple of panelists and you know mentioned what is the opinion on that can I just build on that question if it's okay with you can we ask the panelists to answer both what can the government do as well as what can the companies do associated with that it's not all the government alone maybe starting with Anil and then we'll go down I think the the point was made earlier that India has experience with SEZs but the I think the kinds of SEZs that we have in China you know that's a much much bigger scale and so when you have you know it's like almost a city you know the Suzhou industrial park it's not a park I mean it's a city and so when you have an SEZ of that scale you have the infrastructure you can build a whole cluster and you can build single window clearance but not just a policy single window clearance you have actually the players on the ground within that SEZ so I think that kind of an experiment has I don't think has been done in India and that's a policy issue clearly the creation of that kind of an SEZ and I'm not saying that we need you know 20 joint ventures I was saying we need one to build a showcase not just a showcase for the world a showcase for India so then we said this is the way to do it and then you know replication can be done so I would say that's you know one way to reduce uncertainty one way to reduce the cost of time etc maybe Tiger just what could a company do given this uncertainty or what have you done to try and push through despite the constraints that I know so I think I would say two things one obviously you try and mitigate it yourself you build it into your assumptions and you still then push through and do you know what what what you expect the government to do but couldn't do and you do and so on but the other thing which is equally important is you I think it's all our responsibility for the people inside there are people trying to come in from the outside that's forget them for the people inside we all have to bring visibility to what is important what is the current performance of that how do you change it and I think you got to do that again and again and again and you got to do that collectively and as one voice you got to do that across multiple industries at some point in time that'll have an impact but I mean let's just take uncertainty and time as two things and single single policy clearance bringing visibility to that specifically again and again I think is very very important and we have the responsibility of doing that Joseph any comment we are going back to you I think we you know while we look at business we look at a country as a single entity but you know if we can just keep in mind and I think this challenge is enormous so there is a philosophical change in the way we manage decision making which has to come you have you know the government would take and so you know policy comes out legislative or executive then you have multiple ministries and any large industry will be dependent on at least three or four ministries you come down to the state state level clearance you come down to the city you have the municipal corporation all these things have to be done and I think there is no way that you can draw a matrix which is time cost and certainly dependent which says everything is known there'll be so many unknowns because all these things are also on a change you know they're also constantly changing given this reality that people have found as we said I think you know Tiger made the reference to it that one thing that we've done when there are policies are huge and there is an understanding issue within the government you get good research done you talk to chambers of commerce you talk to media explain to them give them global examples that this is the better possibility so policy decision I think becomes easier because you can more scientifically pitch it to the government but when it comes to execution there is no way that you can say there's a hundred parameters that need to change and there is no single agency believe me even if the central government wants to say something should get done faster in the state they can't possibly do a separate entity which does it and if a state government chooses that something needs to be done at a pace there is a local unit which has to work at its own pace and I think this is a very very large issue which I don't think can get cleared even if all the ills were known until we decide that businesses first and if business has to be executed then we are saying there will be an apex agency which says which will cut across all these three layers of hierarchy and say business first can it happen will it happen I think it's a very very large tall order for expect for us to have the same frequency across these three decision making entities very very difficult. Any other questions? Just to pick up on Nero's point earlier on my name is Jeremy Garrett Cox. You mentioned corruption policy and action and the slow growth in ten years is fear ten years from now what would the panel's views be on confidence that anything that we are talking about today will have changed You have the 40 year view also Ten years rather than 40 I understand These are the question here was who do you give feedback to who is empowered to act I think there are massive systemic changes required it may never get to what you want it to be I don't think I have a prediction I am a huge optimist I think it will change and I think there are two drivers of that change one I think people like us will push it and will push really really hard and two I think competitive forces are going to drive it really hard and I am talking about two different competitive forces like India versus China and all of that and where capital goes and where investment goes will drive that I mean look at the decision making over the last 60 days it's competitive forces that drove it and internal competitive forces will drive it so while you talked about the three level hierarchy there is very clearly a competitive force between investing in one city in a particular state versus some other city in another state over time that disparity will grow and as long as we bring visibility to why it's happened and why some decision was taken to move from one place to another I think it will start driving that so I am a big believer that change will be even more rapid than it has been in the last 20 years. I would want to believe what Tiger said I think change will be a lot slower I think the big change in India is that the regional the political landscape is very very different I don't see that changing so they believe to drive through change either in infrastructure or fiscal consolidation which are the two big things which are required to really catalyze the economy are going to take a lot longer to happen with the references made to the last 60 days but we've done it with our backs to the wall as opposed to policy reform which has been proactive so I'm less optimistic even though the better half of me wants it to happen but I think we will India will grow I don't think we're going to hit the 10% growth rates anytime soon but what will attract foreign capital as Anil said earlier this is too important to market for people to stay away from I don't want to play in this market I think you'll see them being a lot more active in this space but the actual pace of change we're talking about from a policy reform perspective will be much more glacial. Anil? I side with Tiger in terms of I'm a huge optimist and part of my optimism comes from what I would say the neighborhood effect it's just like the neighborhood that we are in poses us to benchmark what's happening in China, Indonesia and Malaysia it's a great neighborhood and I go back to a statement that is attributed to Anand Mahindra 3-4 years back he said for a country that invented yoga India didn't really learn to stretch until China forced it to and so I think that given the neighborhood we are in and just look at the gloom and doom that exists in India this year that's at a 5.5% growth rate that's because our expectations are that we ought to be growing at 10 and Brazil will grow at 2, China officially maybe 7.5 but real on the ground maybe more like 5 so I think this is good to have gloom and doom at 5.5% growth rate to me that's really the neighborhood effect and I think that will continue and that will have a positive effect in terms of things getting sorted out. Great so I think we're going to move to closing statements what I'd like to do is make the closing statements as action oriented as possible so I'd like each of the panelists we've all heard about the optimism we all know the theory of the case that's got I'd like each of the panelists to reflect upon either from this discussion or your own experiences if what would be two actions you take in the government and what would be two actions you take in your own companies or from your own vantage point to capture the opportunity of India. Neeraj. So I think from I'll take a more private equity led perspective obviously I think one is we've talked about the overarching theme with certainty so I'll put that aside so certainty in the tax regime will definitely help private equity investing I think more specifically opening up domestic pools of capital you know insurance funds and pension funds in India are not allowed to invest in private equity or venture so I think that needs to be open you know if China has a massive sovereign fund India should be in the same position and I think secondly we need to improve the ability to delist public companies a lot of you know if you just look at the stock market they all these living dead companies which the squeeze out provisions are impossible in India so we need to change that from what we can do as private equity investors I think one is we need to emphasize the positives a bit more I think Anand's made the point of relative to other markets we're not as bad I think that's important both in terms of growth rates as well as the execution I think secondly talking about the you know what we're still I mean people are coming you know are kicking their heels are dragging into India to invest because they believe the potential of the market right they're not coming willingly right now they say this is a big market there's all this other crap which goes on execution is bad there's corruption there's no transparency but it's going to be a big market and so we should be there and I think you continue to push that story down is number one I think secondly from is really from an investment perspective seek out companies which have great corporate governance I think to the point Vasan made I think in the next five years companies which are regarded as blue chip corporate governance will accrue a greater shareholder value okay great one on each side I think two actions will be two less I would say see there's a new currency which is involved which is called job creation and I think this currency is understood by corporate sector understood by political system and I think globally and locally this currency is going to be the driving force and I think every decision is now going to be benchmarked and there will be increasing pressure to benchmark against each entity which is into decision making how are they helping the system to create more jobs because that's their vote bank that's good for their country and I think if we can determine decision making based on this currency which is happening whether we like it or not as a policy it's happening already we've got states which have become very successful driving only on this theme and I think for corporate sector this theme is going to be important when what we when we go and communicate to the government we say we are taking this action this is going to create so much of job this is going to create this you know economic opportunity and I think would you like to do away with it and you have a firm believe see market is known to all of them doing business they understand the market is there the question is do you want to put a time to it saying I want to achieve so much in 10 years or we say fine we will reach there at some point in time but there's enough to do even today and so that continues to keep the corporates going so continue to make suggestions continue to tell them how now every project that we do we do a social audit alongside the project and one of the impact of the social audit is we don't talk about it but an academic institution goes and talks to the government and says this project has created so many elements of entrepreneurial opportunity it's good for the state it just speaks for itself so then you want 10 other things you go and tell them these 10 things are required some would be from state, cities, regulator there is a different constituency which is working towards so I think if we can start changing the currency and start talking in terms of job creation as a single point of factor I think we'll see a huge change in the country. I would amplify on that I think there should be across all segments of Indian society and real effort made by all elements business government etc to build a consensus which probably doesn't exist today that businesses create jobs and yes businesses make a profit they take 10 or 15 percent at the end but 85 percent of what they do is jobs that's the expense part of the business and that's all jobs that's one thing and the second as a multinational I think to the extent that this still exists I mean multinationals are not a reincarnation of the East India Company I think it's it's time to get past that it's far from it they can create enormous value for India and we should get past that if that still is you know hanging around in the background thank you Tiger and I'll just go back to my theme of I think the government should should understand the importance of speed and uncertainty in almost every decision that is made and every process that is followed to execute that decision you know from our perspective what I would I think all of us should do is bring two types of visibility visibility that allows the government to understand benchmarks outside and therefore what is potentially possible versus what could be lost or what is being lost and to deliberately find a way to create internal competition make one city fight against another city one state fight against another state it happens in China and I think it's a huge up huge thing that actually makes a difference in China obviously there are things that happen at the at the central level but if you can make that happen which I think is actually happening at the micro level and then bring visibility to why because just making it happen is not good enough you've got to make the good versus the bad really visible so the bad really feel bad and then try and become good the I think in India right now the what we need is people in power and by that certainly of course you know the in politics but also in academia in India the media corporate NGO for people in power to actually tell stories stories about what's their vision for India because you see around a vision for India you can bring people together and therefore begin to build patience begin to build tolerance for different views otherwise without that kind of a compelling vision what you really have is just a you know very factious society where because you cannot bring about change even FDI in whatever sector you know it's certainly in the short term it's not going to benefit everybody equally even if it benefits everybody so I think what we need is this kind of a storytelling otherwise everybody says what can the country do for me rather than what I can do for the country we're just going to be at the end of our time I just think there are three or four important themes that emerge from this discussion I hope you all enjoyed and thank the panelists very much for their very specific examples and actions one is this whole theme around speed uncertainty and time and the importance of that making sure that we in India whether you're dealing at the government level competition between the states and in how business acts with that that notion of how to reduce time reduce uncertainty is an important one takeaway second takeaway at least I had was the notion of building partnerships that work right so this is partnerships with the local government partnerships with business and its supply chain in the way that Vasan talked about Joseph talked about to make sure that that actually happens the Apollo hospital example that needed cited and the third was building capabilities right so these are things that actually need to get built in so when you're making that investment decision they're not just making it in terms of building a manufacturing plant but also the supply chain the cluster around it making sure you're able to invest in people skills and capabilities so that you're able to quite quickly overcome some of the constraints that exist I think we're all excited about India as an opportunity hopefully this panel gave you some insights in the sorts of actions that would improve its risk return and therefore investor confidence thank you very much