At AlbaCore, we focus on the long-term. As one of Europe’s leading alternative credit specialists, we invest in private capital solutions, opportunistic and dislocated credit, and structured products. 

Discover more

Specialist in Asia Pacific, Japan, China, India and South East Asia and Global Emerging Market equities.

Discover more

Our philosophy is very simple. We are constantly searching for high quality businesses and when we acquire them, we will work relentlessly with them to create long-term sustainable value through innovation, ESG-led and proactive asset management.

Discover more

formerly Realindex Investments

Leader in active quantitative equities across Australian equities, global equities, emerging markets and global small companies.

Backed by a unique blend of research, portfolio construction and risk management, focused on uncovering original insights and translating them into investment strategies that are active and systematic, aiming to generate alpha.

Discover more

At Stewart Investors, we believe in putting people first. Our investment world-view is of a series of partnerships – with each other, with our clients, with the companies we invest in, the people who buy their goods and services, and with the wider society in which we all live and work.

Discover more

FSSA India monthly view - February 2022

Back on the road, kicking tyres

We have just returned from India — the first investment research trip in India for our entire team in over two years. It was a liberating break from constantly hearing “You’re on mute!” on video calls whilst simultaneously being forced to appreciate your kids’ music lessons in the adjoining room. Saying, “Sorry we are a bit late, the traffic was quite bad,” face-to-face is so much more satisfying! 

Readers familiar with our team will know that assessing organisational culture is at the heart of our investment process. In that context, the comparison between meeting the CEO and the senior management team in his or her office versus a zoom call is like chalk and cheese. We can pick up several cues about culture before we even start the meeting. For example, in the composition of the car park, how bureaucratic the visitor check-in process is, whether there is segregation between management layers — right from the elevators they are allowed to use (yes, this is a thing!) — or if there are pictures of the CEO/owner with famous personalities in the boardrooms and so much more. When a new CEO of a company tells us that capital allocation is going to change for the better, we need to see the look in his or her eye and the body language and the mood in the office to believe it. For our team, a return to ‘normal’ feels like a major handicap has been lifted. 

So what did we learn, having spent two weeks in Mumbai and meeting with 40 companies? Firstly, the bustle that one usually associates with India’s financial capital is back. It was remarkable to notice activity levels — traffic, crowds at restaurants, queues in hotel lobbies and attendance at offices — rising on a day-to-day basis even during our relatively short trip. If Mumbai is a barometer of the times, the long-promised build-out of urban infrastructure is finally here: an underground metro, reclamation projects to build roads and public spaces, brand new fleets of electric buses, slum redevelopment and so on. The more seasoned among the team would temper our excitement, but we definitely see that there is activity on the ground.

Secondly, the mood among the corporates we met was cautiously optimistic. Some, who have historically stayed away from investing or stepping on the accelerator when their peers were gung-ho, such as Kotak Mahindra Bank and Ambuja Cement, are now talking about doing so. We believe that it will take some time for optimism to become more widespread among our holdings given recent history. Corporate India has experienced numerous challenges over the past decade, including dealing with the fallout of scams after the allocation of natural resources (coal, iron ore, telecom spectrum); the resulting wipe-out of state-owned banks that were guilty of funding most of the said excess; demonetisation; implementation of the nationwide Goods and Service Tax (GST); the Non-Banking Finance Company (NBFC) crisis which indirectly crippled growth for the real estate sector; and several industry-specific regulations (India moved its auto emissions standards from the equivalent of EURO 4 to the latest EURO 6 in just three years vs. nine years in the EU1). All of these changes are great for the long term but ended up impairing short-term growth. The country was just about limping back to normality after all this (refer to our updates from end-2019) and then there was an infected bat somewhere…

Over the past two years, most corporates have been in a consolidation mode, shoring up their balance sheets and cutting their operating costs. We have also noticed that leading players in each industry are gaining market share — a natural outcome of regulations that favour organised players and serve to root out companies that have been operating outside the formal economy with respect to taxation and labour laws, etc.

In the near term though, cost inflation is at the top of mind for all the management teams we met. It is clear that margins and working capital will be under some stress in the coming year and it will be a test for managers who have never run companies in severe inflationary environments. We had been surprised at the extent of price hikes undertaken by a wide swathe of companies last year and only now are the effects being felt, with many beginning to see demand-destruction and down-trading. This means that franchises with superior pricing power, and managers adept at manoeuvring supply chains and distribution networks through pricing volatility, will emerge stronger in the medium term.

These short-term headwinds aside, as usual, we spent the majority of our time with owners and CEOs, having direct conversations about the issues that really matter — capital allocation plans, board composition, succession, remuneration practices, and environmental and social headwinds that that they face. It is on issues like these that we look for long-term alignment and we enthusiastically report that we find it more among Indian companies than anywhere else.

Despite all its failings, India has managed to recover strongly from the tragic situation it found itself in last year and is well placed to face similar challenges in the future. As someone said to us during the trip, 1.8 billion jabs have gone into Indian arms — all of them made in India, administered by Indians and most importantly, the vaccines certainly work. The underlying ‘order in chaos’ that is characteristic to India is what we like when investing in this market, instead of the seemingly monolithic ‘order’ masking massive underlying chaos in some other places in the world. 

* Any fund or stock mentioned does not constitute any offer or inducement to enter into any investment activity nor is it a recommendation to purchase or sell any security.

* Company data retrieved from company annual reports or other such investor reports. Financial metrics and valuations are from FactSet and Bloomberg. As at 18 March 2022 or otherwise noted.


Important Information 

References to “we” or “us” are references to First Sentier Investors (FSI). The FSSA Investment Managers business forms part of First Sentier Investors, which is a global asset management business that is ultimately owned by Mitsubishi UFJ Financial Group, Inc (MUFG), a global financial group. 

In Hong Kong, this document is issued by First Sentier Investors (Hong Kong) Limited (FSI HK) and has not been reviewed by the Securities & Futures Commission in Hong Kong. In Singapore, this document is issued by First Sentier Investors (Singapore) (FSIS) whose company registration number is 196900420D. In Australia, this information has been prepared and issued by First Sentier Investors (Australia) IM Ltd (ABN 89 114 194 311, AFSL 289017) (FSI AIM). 

This document is directed at persons who are professional, sophisticated or wholesale clients and has not been prepared for and is not intended for persons who are retail clients. The information herein is for information purposes only. It is not intended to provide you with financial product advice and does not take into account your objectives, financial situation or needs. Before making an investment decision you should consider, with a financial advisor, whether this information is appropriate in light of your investment needs, objectives and financial situation. Some of the funds mentioned herein are not authorised for offer/sale to the public in certain jurisdiction. Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of First Sentier Investors’ portfolios at a certain point in time, and the holdings may change over time. 

Any opinions expressed in this material are the opinions of the individual authors at the time of publication only and are subject to change without notice. Such opinions: (i) are not a recommendation to hold, purchase or sell a particular financial product; (ii) may not include all of the information needed to make an investment decision in relation to such a financial product; and (iii) may substantially differ from other individuals within First Sentier Investors. 

Please refer to the relevant offering documents in relation to any funds mentioned in this material for details, including the risk factors and information on requirements relating to investor eligibility before making a decision about investing in such funds. The offering document is available from First Sentier Investors and FSI on its website and should be considered before any investment decision in relation to any such funds. 

Neither MUFG, FSI HK, FSIS, FSI AIM nor any of affiliates thereof guarantee the performance of any investment or entity referred to in this document or the repayment of capital. Any investment in funds referred to herein are not deposits or other liabilities of MUFG, FSI HK, FSIS, FSI or affiliates thereof and are subject to investment risk, including loss of income and capital invested. 

To the extent permitted by law, no liability is accepted by MUFG, FSI HK, FSIS, FSI AIM nor any of their affiliates for any loss or damage as a result of any reliance on this material. This material contains, or is based upon, information that we believe to be accurate and reliable, however neither the MUFG, FSI HK, FSIS, FSI AIM nor their respective affiliates offer any warranty that it contains no factual errors. No part of this material may be reproduced or transmitted in any form or by any means without the prior written consent of FSI. 

Any performance information has been calculated using exit prices after taking into account all ongoing fees and assuming reinvestment of distributions. No allowance has been made for taxation. Past performance is not indicative of future performance. 

Copyright © First Sentier Investors (Australia) Services Pty Limited 2021 

All rights reserved.