It's time local money played a role in mkts: KKR

Sanjay Nayar, CEO and country head, KKR India believes there is need for local money to get back into the market as it is very crucial for stability in the market. Foreign flows alone will not help; the market needs retail, government and corporate spending.

In an interview to CNBC-TV18, Nayar says the topline growth across sectors still remains weak which is bringing down the growth substantially. According to him, the investment cycle is not picking up due to lack of confidence among Indian entrepreneurs. The confidence to begin new projects and ensure new growth is required to build the economy but that is still lacking in India, he adds. Below is the verbatim transcript of Sanjay Nayar’s interview on CNBC-TV18 Q: Ahead of this conference, you would have spoken to a lot of foreign institutional investors (FIIs). We have seen consistent buying, how is the mood of FIIs?
A: Just to focus on FIIs and the marginal flows, I have not spoken to too many FIIs, but I do speak to a lot of long-term investors who work with firms like us and I think the basic issue on the table right now is people need to see local money at play. There is too much of foreign money at the margin that we keep talking about, so we need to see the local retail savings come back into the debt markets, into the equity markets.
We need to see government money coming back for spending. So, all the local flows are missing and that is what we need to see both in terms of more stability in the capital markets, both yields and equity markets and you need to see the government money coming back to get the spending and growth going again. Q: Is that long awaited turning of the corner over for the economy? We may have stopped getting incremental bad news, but are you beginning to see incremental good news?
A: I think the top-line of companies translating from volume growth and price elasticity is still pretty weak across all sectors - industrials is pretty evident but even in consumer sector we are seeing lot lesser discretionary spend now.
It is bringing down the growth to a good balance, but unfortunately a much lower balance of 4.5 percent and we see that in the volumes that we track and the value that we track in the companies and so, it is not turning. You might ask that question to people who are banking on new projects. Maybe there is an impact of the Cabinet Committee on Investment (CCI), things have been cleared. We do not see that in our companies, because we have invested in companies that are already up and running. Q: From the interactions we have with people the key issue for the stock market at this point is that the investment cycle has not resumed. There is hardly any evidence of any pick up in terms of projects. Are you getting that sense as well? In terms of a timeline how long do you think we will have to wait before there is any kind of resumption there?
A: It has to come back to the confidence of the Indian businessmen. Indian entrepreneur has to feel confident of borrowing and putting equity into the ground and building projects. That is still missing. People are happy to sweat the assets, which is the right thing to do. People are cutting costs and trying to make sure they can meet targets.
However, the growth story in India cannot be just about that. You have to get new projects, new growth, new capacity, new sales and the pent-up demand is huge, so that confidence level has to still turn. I do not see that turning as yet. You see it in financial services, IT and all, but to build the economy you got to build some real assets. That confidence is still lacking. Q: You still had news of Pepsi and Coke putting in USD 10 billion by 2020 in India. Is this a near-term pain? Does this lack of consumers biting go away in a year? Does it look like even longer than that for you?
A: The consumer spending can come back much faster, but the corporate spending to come back will take a little longer. The vegetable prices and the whole consumer price index (CPI) can come under control with all the measures being taken. You are going to see the negative impact of more petroleum and diesel prices being deregulated.
Consumer spending will come back. I do not think we should worry about that too much. We should really worry about government spending, corporate spending, new investments and focus on that. Do not focus on just FII flows. They are trading Monday to Friday. Q: If we are not able to break the back of inflation do you think even the consumer is going to take a goodish bit to return?
A: The income levels are going up. Salaries are going up. It is not that we are seeing people get salary cuts. I still see companies trying to meet inflation plus kind of demand on the salary increments.