Growth unlikely unless governance model changes: Enam

Senthil: I want to ask you to put on that investment banking hat of yours, the merchant banker that you were. You told us that it is the people behind the business that you look for. So, clearly Narayana Murthy and Nandan all of them struck a cord in you. You clearly inspired by the current prime minister. If you were to take India public, we already undersell ourselves. So, what would be the premium you would ask India to seek from the world?

A: When you take companies public you have to also time yourself. So, I will raise alternative resources till I am able to really create an image which may be 15-18 months out. It is too early, we are disengaging from the past, some of the problems have to be solved. So, real action can begin only in another 12 months or so. Once that happens I would ask for a very high PE.

Senthil: What PE would you ask for India? You said we need to raise about USD 50-100 billion.

A: Anywhere probably in the range of 20.

Senthil: That is more than what the market is valued today..

A: When the company is as large as India that PE has a different meaning.

Senthil: You thought USD 50-100 billion you said we need to raise that. The caution was we need to raise that in the next 3-4 years otherwise we miss the bus. You also said we will have to think out of the box. You gave us some idea of how do you think out of the box but just elaborate on how can India think out of the box?

A: For example, when it came to divestment, we have had three ideas and we have seen the way divestment happens. Typically, if you are a listed company the stock goes down. I cannot discuss specific ideas but I am just giving you the problem areas. Typically, we see price slide down dramatically or the government has had to resort to inter company holdings like IOC, ONGC etc or we have seen large dividends out. Then we think out of the box.

I talked about railways and ports and so on and have we attempted that can we say for example typically in an infrastructure company or a private company you have a situation where you sell an existing business to build another one. Has the government done anything like that? Can we do something like this? We have huge assets that probably could be privatised. So, it may not be appropriate for a public forum to discuss more specifically. So, both in terms of divestment, in terms of bonds, in terms of engaging with the sovereigns on the other side, I think our engagement in G20 or now on a global level is of a very different order now where we don’t have to go out with a begging bowl, can I make more complex deals? So, the victory we have had at the WTO, we have been seen both as a principle player and as a facilitator without giving our quarter has raised our respect. The fact that Obama is coming here has raised our respect. This whole premium enhancement by the man of the moment has been happening and the financing has to follow. If the financing doesn’t follow then may be we will miss the boat.

Q: While the rest of the world always says get out of – just take your money and let others do everything. You said government should give an example, sell some business to start a new business. When you say business you obviously mean areas. What areas do you want the government in where it is not today?

A: I think improving the human stock, safety, health, skills. When I say health I am talking about sanitation and so on and providing the facilitation for building infrastructure rather than building it all one self. I think those are the prime areas where we need to use those funds.

Q: You have got great faith in Modi. You have said governance by deadline, governance by online and nation before mind those are the only three and you need those three. It is not easy even for one man as popular as Modi. It means you got to breakthrough vested interests of tremendous order. Has the mood in the nation changed that the nation will back him to do that?

A: Some times the way to handle a congestion is to bypass it. If you see, Modi consistently has developed a sloganeering not for the sake of it but as a strategy. He said development is my only agenda and can I make these people instead of engaging with them in their rules and their arena, can I change the battleground? Can I let their imagination move from their day to day tasks to something else where there is no convention, there is no precedent, there is no law and you have to rewrite the law etc and it is possible. I cannot get into specifics but I have seen some of this.

Say for example the history of Electricity Act 2003. When the Electricity Act was passed, it changed so many things. How in one go large amount of debts were settled and a future course was created. If you talk about open access, you talk about all the solutions that people have been struggling for, they completely are ready to engage at a different level. So, you have to deal with things in a more imaginative manner and I think we have enough precedence and more will be done.

Q: You set out that yes we can grow, if we do the following things we can grow. Let us assume we do it. We therefore enter into what many think we will enter into a multi year bull run. You have also said we need a lot of investment, I know you are not only talking about investment in the stock markets but let me just come back, we are woefully under invested in the stock market. Indians as a class are woefully under invested in the stock market. There are lot of people out there who if they want to secure their financial future it is time they got into the markets. How should they go about it?

A: We have to create an environment for new businesses. It is new businesses that create massive amounts of wealth not established companies. So, we need a lot of them. So, whether through IPOs, through private equity, through funds who are much larger participants, like the government has announced Rs 10000 crore fund for start-ups. However we haven’t heard any meaningful follow up. One follow up I heard was that the banks will give surplus funds to SIDBI which will be the anchor investor and may be ebb the difficulties.

It speaks volumes of the intent of the government but I think we all collectively need to put the pressure on the government, give them feedback. If the government is ready to receive feedback then this Rs 10,000 crore has to become Rs 1,00,000 or ideally why should the government be doing this. We don’t want government in enterprise primarily. Why can't society find methods? Why can't we as opinion makers create a facility where this amount is Rs 1,00,000 and we really become large angel investors in many businesses. That is how we spawn a lot of new enterprises and they go public and that is how people will come. So, it is the lack of IPOs and whatever happened.

One other feature of typical start-up is that they beat rent seeking. I think we went down seriously by rent seeking I guess. So, we need to create counter rent seeking also. So, multiple things, I think without that new class of companies, new class of investments, people will again go back because the market is so expensive, either they make mistakes, create a trash or they go to alternative methods.

Q: A question we have been debating through the day. Has the commodity super cycle really ended in your opinion?

A: It is very difficult to say where these cycles begin and where they end. However for the time being given how liquidity was being created, how liquidity was being managed and the power of the powers that be I think money was a large part of commodity cycle and I think that money has indeed moved. I don’t see things falling in one fell swoop but I do see that the great vision that we had only three years ago that nothing will be available I think clearly has gone.