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this podcast is brought to you by India
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knowledge at Wharton please visit
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knowledge.warton.upan.edu India for more
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information
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inclusive growth infrastructure
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development and collaboration in science
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and technology were the major themes
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discussed at the recent Global
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partnership Summit organized in
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Washington DC by the U.S India Business
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Council business and political leaders
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from both countries participated in the
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event which also marked the U.S ibc's
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33rd anniversary Indian knowledge at
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Wharton spoke with Business Leaders at
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the event about the challenges they
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faced doing business in a rapidly
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globalizing economy Our Guest today is
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Ravi luchenpola president and CEO of the
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U.S operations of kotak Mahindra
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Ravi thank you so much for joining us
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today thank you for having me here
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Mahindra is a household name in India so
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outside of India it's not that well
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known could you tell us a little bit
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about the company as well as about the
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U.S operations kotak as a group has
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grown enormously over the last seven to
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eight years in every aspect of financial
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services business in India we are fairly
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india-centric we are specialist on India
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and the Indian Financial Services part
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of it there back in India we swamped the
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entire Capital Market space with one of
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the largest investment Banks we are the
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largest domestic stock brokers in the
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country we manage about eight to nine
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percent of the market volumes
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fairly large in asset time in business
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we manage about 14 billion dollars of
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assets under management there both in
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equities and and debt part of it there
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we have a life insurance business which
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is top five in the country car financing
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business internationally what we've done
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is we have been focusing mostly on a
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couple of areas of businesses there one
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is the institutional Equity sales
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which is a fairly research driven
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business there and focused on
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all investors large institutional
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investors who come to India there in
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that business we almost are the top five
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uh into India
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give you a volume of business there the
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total amount of uh fii Investments have
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quadrupled over a period of last three
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years time there into India and the
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number of participants have also grown
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significantly in the U.S we have a desk
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which does only institutional Equity
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sales there and we are fairly dominant
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franchise in that business
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in the second part of the business we do
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is distribution of various type of
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sectoral and thematic funds into India
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the fully managed funds and also
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separate accounts for larger investors
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like institutions and endowments who
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want to invest into India there we cater
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to them apart from very high net worth
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ultra high net worth individuals and
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family offices
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we have some other huisu families who
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invest through us into the country there
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the third part of the business is we
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provide platforms for people like hedge
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funds and large institutions to plug in
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and to trade into India there so the
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three the different businesses we have
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so you don't have a retail prisons like
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a banking presence there which you need
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to have a more branding across the place
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there anyone and everyone who in want to
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invest into India wants a step in uh
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know that kotak is the one of the you
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know larger players
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so on a more specialized area of India
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investing
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and Indian Capital markets kotak is
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fairly known in that Community there the
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Indian economy has been booming for many
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years and from what you just said it
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sounds like that boom has been mirrored
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in kotak mahindra's growth but now the
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Indian economy seems to be slowing down
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what is your strategy with dealing with
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that new situation yeah I think the
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Indian economy the growth path is not
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going to be a directional change in the
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growth path there it's going to be
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clearly growing at a very significant
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rate there as the minister was talking
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today about growth coming down to 8.4
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levels there honest we did a stress test
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analysis of the entire growth scenario
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there and found that essentially the
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Indian growth will come down because of
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the U.S recession and other things there
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and the global flows coming down there
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to 8.4 on the worst case scenario we did
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a stresses where we said that if there's
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a global decision
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if there is a monsoon drought in in
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India and if there's a global liquidity
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flow dry out there what happens to India
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so we found that it's going to be from
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8.4 it comes down to 6.4 percent
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now 6.4 Plus 8 percent of the inflation
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there on a nominal growth you're looking
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at a plus 14 growth there which is still
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significant on the world economic
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scenario there so essentially that way
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you're saying it's that though there is
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there's some amount of effect on the
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growth because the global events there
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uh economy wise they're fairly decoupled
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to the world uh economic economy there
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look at exports
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the total amount of exports percentage
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on the GDP is approximately what 16 to
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18 percent there
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the exports to U.S is 20 of that
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which basically means that the impact if
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the U.S exports growth becomes zero we
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found that it will impact the GDP by
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about 20 business points
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but still not nothing significant in
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terms of the impact there but the
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overall impact on the capital markets is
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clearly seen as you see in the
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corrections that are happening there in
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the market uh the markets were
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overheated until December so you're
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seeing a clear correction happening
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there apart from the sentiment of the
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and the liquidity flows coming down
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significantly from the from the past so
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the fear that you have on the Capital
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Market side is that on the capital
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markets you're coupled into the world
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markets there on the economy wise you're
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decoupled so the two too clear they got
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me there in that part of it there so the
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growth of the country will be there they
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might not be significant to nine percent
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but to eight percent levels there on the
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Capital Market side you will see impact
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of capital flow coming down which will
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have an impact overall on the on the
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stock markets what is your biggest
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concern about the Indian economy I think
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the biggest concerns are very clearly
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laid out there your current don't
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deficit
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ballooning thanks to the oil bill and
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the food crisis that's happening there
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the inflation thanks to this these
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impact of these things there is looming
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very large there uh you're almost
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looking at touching a double double
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digit inflation levels there which
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probably is true with many of the
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Emerging Markets uh economies there
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where inflation is a concern including a
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large economy like U.S inflation is a
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concern but for India it's a much bigger
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concern uh so these two the the impact
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of current account deficit and the
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inflation uh will clearly have a sort of
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effect on the economy itself so it's not
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just the Indian economy that faces
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difficulties the world economy also has
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its own problems what is your strategy
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for dealing with a global slowdown I
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think basically it's a
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the growth still being strong in the
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domestic market
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and a lot of interest from International
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Players to come into India ah we do not
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see we do we see a clear slow down
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happening but we don't see a significant
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uh negative uh growth happening there so
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that way uh the business uh will be
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fairly fine your 40 to 60 growth of of
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your company's corporate corporates in
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India will come down probably to at 25
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to 30 percent growth share which still
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is significantly okay so we are very
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positive on a medium term to long term
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though on the short term we have
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concerns there what is your biggest fear
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our biggest fear would be uh liquidity
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flows into the country drying out
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because of global liquidity factors
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there that will be the biggest impact
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that India will see there the capital
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required for all these corporates to
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fund their expansion the money that is
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acquired by the government and the
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corporates for infrastructure financing
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we're talking about 450 billion dollars
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to flow in the next four and a half
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years it's a very tight four and a half
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years time for money to flow and if the
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global Equity flows down if the fears of
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funding to happen there you will see
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significant impact in media term the
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long term also on the growth pattern for
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the country itself to flip the question
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around where do you find the biggest
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opportunities the biggest opportunity is
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uh once you come out of this the
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temporary immediate concerns of of the
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liquidity flows and the inflations and
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the current account deficit the biggest
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opportunity obviously is infrastructure
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as as one big space for the country
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where so many world players are looking
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for investment into the country and
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that's the biggest opportunity for all
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Indian corporates be it in banking you
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know infrastructure infrastructure
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services
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and the government itself an opportunity
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to attract capital from abroad that's a
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fairly large opportunity that we have
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there during the course of your career
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what is the biggest leadership challenge
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you have faced how did you deal with it
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and what did you learn from it
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I think I've been in us for the last
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eight years and before that I worked for
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a long time in India
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the biggest challenge that we all face
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is is Manpower
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skilled Manpower recruitment of these
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people
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so the right recruiting the right guys
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and the right people has been the
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biggest challenge for us you need to get
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the right guy for the right job
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um and the right skills and the right
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training
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um probably that's that's been the
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biggest challenge for me and then once
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you've recruited them retaining them
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absolutely retaining them and showing
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them the luckily for us for the last uh
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five years uh the growth has been so
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phenomenal all over the country in India
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and abroad for us doing India business
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there
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remunerations were not a problem the the
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quadrupled over the last probably uh six
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seven years time there we've seen that
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benefit of that so we're not having a
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problem of uh uh you know remunerating
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people for their when they when they
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really deliver
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the problem has been training them
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for operator tasks because
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specialization has become very very
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important now and to get the right guy
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for the right job has always been always
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been a tough challenge for us especially
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in the international part of it because
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you need a person when you're recruiting
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internationally with much more broader
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knowledge and not just specific product
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knowledge here to be able to serve your
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clients and customers there and to get
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that right expertise and with the
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dimension which is much more broader
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than a person who's just doing U.S
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Centric work uh has been an issue for us
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where do you expect kotak mahindra's U.S
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business to be in the next four or five
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years we are expanding on uh now on to
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the cross-border m a side in the US
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that's been one area which uh is a
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initiative we're taking up now we see a
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lot of opportunity in that space a lot
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of companies in the US who are looking
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for opportunities in India be joint
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venture being be it
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getting it the space into the into the
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corporates existing corporates in India
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there taking a stake buying out
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joint collaborations so you have various
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options which U.S International
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companies have to go into India there
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and if they want to be a part of the
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growth that's happening in the country
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there also Indian corporates are all who
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have raised money over the last five
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years there sitting in a fairly good
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amount of cash on the balance sheet
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which is good for Acquisitions there uh
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at one estimate which is again a rough
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estimate of of money there this close to
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about 300 to 350 billion dollars of cash
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available uh for Acquisitions abroad uh
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which will be Unleashed over a period of
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time there uh leverage it further if
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it's leveraging is available there if
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you're looking at much much more than
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that of uh Acquisitions to happen there
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many of the corporates have become much
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more confident and clear and clear in
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their strategies there and they're
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pursuing uh this kind of uh Global uh
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you know footprint so you have options
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that they have of buying into companies
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which are much more cheaper now than
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what they were in the past Revolution
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thank you so much for joining us today
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thank you so much for giving the
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opportunity
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for more information please visit
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knowledge.worton.upen.edu India
