In part II of our conversation with Krishna Bahirwani, 7investing’s own Luke and Krzysztof embarked on a wild ride through the bustling bazaars of the Indian investment landscape! We zigzagged through throngs of Systematic Investment Plans (SIPs) where retail investors have a favorable set-up with low or no fees, thanks to its scale. We also discussed the information goldmine that was screener.in, where we could dig up 10 years’ worth of financials on any company.

As we journeyed through the potential growth of India as a global powerhouse, we found tantalizing opportunities that came with the rise in per capita and disposable income. We also eavesdropped on the sophisticated chatter in the “Indians Invest Globally” community — make sure you ask Krishna about it on twitter. And just when you thought we were done, we took a detour to explore the exciting terrain of India-focused ETFs, especially those feisty small cap ones. So, buckle up and enjoy the ride through the emerging and thrilling world of Indian investment!

Transcript:

Luke: [00:00:00] Hello everybody and welcome to the latest edition of the 7investing podcast. If you can’t tell, we’re picking up again with our buddy Krishna and I’m here with Krzysztof. We’re all wearing the same t-shirts. We’re actually recording still. This episode goes out on the 30th of May. You know, Krishna shall, I didn’t say in part one, but, uh, just three days after this episode goes live, I’ll be arriving in Hyderabad on my way to Sri Lanka. So I’m gonna spend a couple of days in the city. I think you are in Mumbai though, is that right?

Krishna: Absolutely. Yes. I’m, I’m in Mumbai. 

Luke: I am sorry. We’re not gonna get a chance to catch up. Um, Mumbai is a fa, a fascinating city, and I know you told us quite a bit about, um, kind of what’s happening in India generally. In our first conversation, we talked about demographics and the retail investor mindset, whereas we pick up part two of the conversation and I, if you haven’t listened to part one, like I highly encourage you to, go and check it out. But in this second half of the conversation, we’re gonna get into some of, the nitty gritty. We’re gonna talk about some of the challenges faced [00:01:00] by, uh, retail investors in India. What’s happening with the future of investing in Indiana? What’s the trajectory of the country? Um, and we’re also gonna get into a couple of interesting sectors and segments that Krishna thinks are particularly interesting perhaps for overseas investors.

Um, and maybe, maybe also we can wrap close out with any practical advice you might have for listeners who are interested in building a bit of an Indian exposure in their investment portfolios. Um, but why don’t we kick off with that first topic, though, challenges faced by retail investors in India. Um, where, where should we start with that?

Krishna: so, like I said in the previous episode, we have a lot of new investors coming to the market and, um, you know, that means they could, get their information from all kinds of different sources. And I think that’s where a lot of the challenge would lie, uh, in being able to find the right kind of resources, uh, as an investor. Uh, of course, the Indian stock [00:02:00] exchanges put out detailed filings. You get quarterly reports, presentations, con calls, uh, annual reports. So you, you do have, um, you know, all of that. But it’s important that the retail investor knows to look for these things. And that largely depends on, you know, how they’re being introduced to the market.

Uh, the government on their part is doing a lot in terms of, uh, educating retail investors as far as mutual funds go. Uh, so there are a lot of investor awareness, mutual fund advertisements put out by the government, which encourages them to do sipps, which is nothing, um, other than dollar cost averaging.

So an s i p is like a fixed investment that goes into a mutual fund product every month. They’re really, really popular, in India and a lot of people, um, take out a small portion of their salary and put it [00:03:00] into, mutual funds. Mutual funds are well regulated. That part of it is, is good.

I would say that you’re far more supported as an Indian retail investor, , as opposed to, , the equivalent in the US because, uh, the sheer scale of, uh, the number of investors allows, platforms to charge either nothing or very low fees, uh, to be able to provide products. Um, for example, you know, we have a tool here that’s really popular called screener.in, uh, it’s a website, screener.in, and you can just like type any company. you get 10 years worth of financials. You get, uh, 200 day moving average, 50 day moving average, you get a list of prominent shareholders. Um, you get cash flow statements, you get a summary of the business operations. Um, and now it’s even integrated with chatGPT and you can summarize con calls with one click. And the vast [00:04:00] majority of these functions are free to use, um, for anyone interested in any company. They can just type the name and do it. Um, it’s only a handful of features that are behind a payroll, I would say the quality of YouTube content as far as educating investors goes, uh, in India is, uh, quite high. You also have a lot of crap, but like, I, I guess that’s everywhere. Uh, but you do have good quality material o off of YouTube. Um, you have career investors coming on YouTube, um, and you can, you know, hear them talk on a regular basis. Your fund managers come on again, they talk on a regular basis. So if you know, um, your way around things, you can do a lot of the stuff.

Just give you an example, the research reports from brokers, um, in, in, india, you can access them by like just giving your email address and a few details, [00:05:00] which in the US is a lot harder to do because, uh, you know, they don’t just give you their brokerage reports for, for free. But you do get that here. Um, uh, you know, the price targets can be as off as they are in the US but you, you’ll at least get a good sense of the business, you know? Um, so I I would say it’s, it’s easier in ways and it’s harder in ways, harder, more for beginners. If you are, um, you know, an intermediate level investor in India, it’s a lot easier for you than it would be in the us especially in terms of financial investment. 

Luke: And I, I suppose I didn’t mention an intro, but you are the founder of Indians Invest Globally, which is a community of over 1200 retail investors and folk interested in that in the market. What kind of conversations do you have in that community? What sort of things are people interested in? 

Krishna: Indians invest globally is a community of investors who invest abroad and in India. So they’re [00:06:00] generally more sophisticated investors. So the types of discussions that take place, whether it is on India or abroad, uh, are generally, you know, uh, more nuanced, more advanced, you know, um, they’re more in detail. You’re not running like basic investor awareness. Just to give you an example, one of, one of the biggest, international platforms to invest through, uh, in India, uh, we have the founder of that, platform as a member. So you’ll just come casually, like chat on the, uh, on the group chat. So, you know, you’ve got a really great audience, and the, the level of questions is actually really, really high because, you know, you do need to have a certain net worth for international investing to make sense in terms of the fees that would put you in a different segment compared to Delhi investors Association, which I mentioned. Uh, both these groups are like free to join and, you know, [00:07:00] anyone can join them. Um, but like Delhi Investors Association, for example, has more than. 23,000 members right now. Uh, and that’s because, you know, the barrier to entry is very low. Um, you could, open up a brokerage account for maybe like $5, $8. There are platforms that allow you to do it absolutely for free. And like I said, you can do it in 30 minutes. So the barriers to entry in the Indian market are far less than they are in the US market and that’s why the discussion levels in these two groups can vary. Of course, we get a lot of experts, um, on DI as well and they have AMAs that sometimes last for hours and hours and hours and hours. Uh, but yeah, I think both communities are in incredibly passionate and, they’re ecosystems in themselves. 

Krzysztof: Can I ask a very nuts and bolts, uh, kind of question that hopefully will be of use to our listeners wherever you are globally. If you are an [00:08:00] investor who wants to participate in, india, what do you, what, what account do you need to open up? What’s step one?

Krishna: as a foreigner, your options to invest in India are limited unless you are an nri, um, which is a non-resident Indian or, um, overseas citizen of India, or you’re basically of Indian descent and you can acquire. Uh, you know, one of these two statuses. Um, outside of that, you are limited to ETFs, um, which you can get in on the US market. Uh, there are ample number of, uh, india focused, uh, ETFs. What I’m hoping is as India rises in its, um, uh, stature and, uh, you know, the, the market cap of india goes up, uh, you’ll have more thematic ETFs, uh, specific to India, uh, which right now aren’t that many. I know there is a, uh, there’s a consumer [00:09:00] ETF that you can get access to. There’s a tech, based ETF that you can get access to. but generally, like most of them will mirror the, uh, the most popular index in India, which is an Nifty 50, , which is the top 50 companies, uh, listed on the National Stock exchange. And it’s the most popular index in India. that will give you some broad-based exposure to India. Um, you can also invest in a small cap EDF in India, uh, which is also available in the US market. 

Luke: Is it common Krishna for Indian companies to be listed under an ADR overseas? 

Krishna: uh, so it was, uh, once upon a time, where Indians, companies needed to go outside to get capital, uh, but Indian markets are becoming increasingly strong. Foreign investor in above the net worth of 50 million, um, you know, they’re able to invest directly in India. So there’s a lot of. money coming into India through the [00:10:00] route of, uh, mutual funds, um, through the, , the root of portfolio management services. So, there is no need for a lot of companies to go abroad and list. Some of them still do, but it’s fairly uncommon. The ones you see are actually very, very well established Indian companies that listed during the nineties or the two thousands. Um, I mean, I would say right now the ratio would be like a hundred to one. In terms of number of companies that would list in India as opposed to the ones going abroad. Specific companies do list sometimes only in the us like FreshWorks, um, you know, um, which has its CRM suite and is a really popular company. Uh, didn’t choose to list in India. Um, India’s largest, um, travel aggregator make My trip again is listed in the uS not listed in India. So you do have some cases like that of very prominent companies, uh, going abroad And, [00:11:00] listing. And, you know, uh, even during the SPAC phase, um, there were a lot of potential opportunities that that could have opened up, had that phase gone on a bit longer. Um, but yeah, as of right now I don’t see, um, you getting, uh, proper exposure to India via ADRs. Uh, I would say ETFs are much better.

Luke: That’ll be interesting in the future if more sematic ETFs pop up. I’m, I’m kind of lucky. I, I think I can apply personally for personal of Indian origin status. So I, I haven’t got the $50 million, but maybe I could be able to build an Indian portfolio if I pursued that route. Um, but otherwise, if you don’t have that sort of wealth level or those connections, then um, ETF sounds like they’re the way to go. 

Krishna: yeah. Like we said, you know, there should be a lot more that, uh, would pop up. If I’m an asset manager, you know, sitting in the US today at BlackRock or iShares or Vanguard or, you know, I [00:12:00] would be looking at India going like, this is an exciting space. Um, that’s growing. 

Luke: Maybe we can turn the conversation towards the future a little bit and, um, you know, your own sort of vision as the founder of Indians invest globally for the future of investing in India, but maybe also just what’s happening in the country, emerging trends and potential growth areas. Is there anything in particular a draw our attention to? 

Krzysztof: May I, uh, just add one one little bit of, uh, setup for you, Krishna. Uh, on top of what Luke was saying, I discovered that the recent growth in india. Uh, has been quite stellar, but it hasn’t quite gone the, that sort of exponential curve yet. But that all of this was pretty much done, uh, up to now without actual industrialization and that but the raw materials for all the industrialization are already kind of in place with the roads and trains and [00:13:00] the, the internet boom and, all of that. and so it’s almost, it seems to me, again, I’m looking for, for your color and feedback and nuance, that it’s almost astounding that all of this is seems like prep work for the next huge leap.

Krishna: That, that’s actually remarkably insightful that you managed to put all of that together by reading stuff on the internet. Uh, but yeah, you’re absolutely right. So, um, most of the Asian economies, uh, sort of follow a blueprint, which is export, a lot of goods, cheap manufacturing and then reinvest that capital back into infrastructure.

And that forms like this, you know, Self propagating cycle, uh, that creates that exponential curve now, uh, different to a lot of these other, uh, economies, India has built its [00:14:00] back on services. We as a country import 84% of our, our oil need, um, from around the world.

But despite having such a big deficiency, um, our software exports today are larger than our entire oil import bill. Um, so that’s really, really massive. and you know, all the companies listed again in the US are all these IT companies which have ADRs because they’ve grown into these outsourcing powerhouses. I wouldn’t say that industrialization did happen, but, it was sort of like an in complete hatchet job. 

Uh, that was done, uh, over the years, it was very disproportionate because it depended on the, , willingness and capability of the individual entrepreneur, which is why you would have like, you know, some examples of businesses that did really, really well because they dealt with really adverse conditions, um, and were then able to grow. And when India’s [00:15:00] liberalization moment happened in 91, they were sort of ready to, to skyrocket. Uh, and a lot of these businesses, uh, have had the, industrial background, but it’s not been broad based and the government recognizes that. And in fact, uh, you know, even Morgan Stanley in the report has written, um, that, uh, they expect manufacturing to three x by 2031. That’s you, you know that, that’s crazy, uh, when, when you look at these numbers. But when you look at the production linked incentive scheme, it makes a lot of sense. , because if you have an additional, uh, $520 billion worth of output coming from selected industries, and when we talk about sectors, the top four segments in the production linked incentive scheme are also four of the most promising sectors in India, which would be pharmaceuticals, uh, specialty chemicals, [00:16:00] electronics, um, and I would add a fourth component around renewables, because as India’s energy transition happens, as much of energy needs of India increasing and a lot of that incremental capacity. It’s going to come from renewables, so we don’t need to transition because, uh, it’s all fresh CapEx, you know, that’s coming out.

Luke: I know Krzysztof is a real kind of renewables and a battery head Is, um, is that predominantly solar or title or other sorts of 

Krishna: so solar is primarily solar because India gets great sunlight for most of the country. Uh, we’ve also set up a power exchange, uh, in India. Uh, they’re trying to get more and more of the, power that’s collected through solar, uh, connected to this grid system so that, you know, you, someone in a state with less sunlight can buy electricity in real time from a state with more [00:17:00] sunlight. Uh, and we can increase as far as possible. Uh, you know, the extent of renewables. um, In the overall energy basket. Um, the government is really, really, really like pushing, solar as a segment. The two biggest conglomerates in India, Reliance and Adani, have made major investments in the, clean energy space.

And, uh, that seems to be a segment that’s gonna grow massively. Uh, you, you have another sort of mini trend, uh, green transition. I don’t look at it just in terms of power. You’ve also got, you know, other stuff like, um, uh, taking care of the environment, recycling, um, you know, place like that. uh, energy efficiency is becoming a big theme in India. So all of the electronics that are getting made, whether it’s fans, air conditioners, stuff like that, they’re getting rated on a scale. [00:18:00] So you buy any product. From a store, it, it has a central energy rating on it as to how energy efficient, uh, that device is compared to its peers. 

So there’s a lot of emphasis on, uh, both efficiency and being as green as possible. Uh, we take the Paris Accord really, really seriously in India. I think India is one of the only few countries that’s on track to meet their Paris Agreement goals. so yeah, renewables is a major, major, major team in India.

Krzysztof: I was gonna say in, in the little battery company that, that could or might, that I’ve been obsessed with for the last few months on its global energy, uh, opportunity presentation. It listed three flags on the on the internationals scene in India. was one of the flags. So FYI e everybody’s looking, I think, uh, toward India as, as an obvious place for [00:19:00] massive, massive investment in, in terms of manufacturing infrastructure and renewables.

Luke: It’s fascinating area. I’m actually looking at a renewables company myself for my own 1st of June 7investing recommendation. Um, I haven’t dug into their India exposure yet, so I’ll have to do that. 

Krishna: Uh, yeah. Also, like one more thing to remember because India’s oil exposure is so externally dependent. Um, you know, uh, it becomes a matter of energy security to have as much, uh, of a chunk of renewables in their, uh, uh, you know, energy basket as is possible. Uh, so as to reduce the external dependency.

 Also, uh, in terms of a renewable play. India is big on ethanol, um, as a blend into their fuel. This is something that’s actually big in Brazil, uh, where they do a lot of ethanol blending in order to reduce their oil exposure. Um, and, all petrol in India [00:20:00] should be et ethanol blended to 20% et ethanol. It is, um, an interesting fuel source and I think India’s, uh, India’s exploring it a lot. Um, they’re, they’re super ambitious. Uh, there’s something called E hundred, which is, uh, purely ethanol based fuel. So they’re even exploring the idea of maybe having that and how that would work, Uh, because india is such a big agricultural country and, um, about 40% of Indians are still farmers. So if you can produce something outta grain, created a great source of income for people and you’ve created a great import substitute. So that’s another very interesting area. 

Luke: is this kind of the area we would term as being like biofuels in the uk? 

Krishna: Biofuels is the segment because when they talk about it, that’s usually the moniker they use. 

Luke: Okay. 

Krzysztof: Krishna, I know you are not at liberty to talk about specific stocks, 

Krishna: Hmm. 

Krzysztof: but how can you, can you help us get as [00:21:00] granular as possible? For, for somebody that’s listening to this, and says, okay, I’m buying what they’re selling, and India’s the next, uh, emergent global power, and we, I, I’m on board, uh, uh, outside, you know, general ETFs. What, where, where Are you looking? Where are your eagle eyes focused on finding individual opportunities? 

Krishna: A large part of my portfolio is geared towards this jump in per capita income. As disposable income increases, where would you spend your money? You know, that’s sort of a, a major, major theme, you know, running in my portfolio. So you could see something like, you know, um, movie theaters, for example, getting a larger share, although that is a segment that’s being disrupted, but there’s still so much demand that’s going to come, um, you know, to be able to, uh, go out and have a great time at a, at a cinema or. [00:22:00] Um, you know, to be able to buy something that previously was a little bit out of budget. 

Uh, India being such a strong consumer staples place, anything in the discretionary basket for me, uh, is something that will go through disproportionate growth relative to everything else. I think even Mo did a study of all the companies that were hundred baggers, uh, 20 year period and there was one discretionary player in it. So that tells you how much that basket is ready to fire. Uh, it’s been export services, it’s been pharmaceuticals and, uh, chemicals players, and it’s been infrastructure players. Which have done well up until now.

As your income increases, that middle class gets the ability to spend more, um, you know, as, as a listener, what would you spend on, you know, if, uh, up until now you could only spend on your basics and now you can spend, you know, [00:23:00] double the amount of money that you had before, but half of it is disposable. Where would you spend? 

Krzysztof: So I have, I have the, I think the best, uh, is sort of, I, I, it’s not sci-fi, but it definitely is future oriented question for you we know, that Apple has positioned itself as, a luxury brand. And they’re not willing to go down market. And that’s part of the, the brilliance of the strategy because it’s a status symbol and it’s, you know, all of that, And we know, uh, Apple is now full in, in thinking of India as its next big luxury market, right? So obviously, uh, there’s a lot of um, people that won’t have access to, to Apple products, but nonetheless, there’s obviously enough that Apple’s going. forward in your best prediction, when does Tesla show up in India?

Krishna: Oh, see, I, I’m far more bullish on, on Apple’s growth in India than I would say Tesla’s growth in India because by the [00:24:00] time Tesla can arrive in India, uh, you may have an already really, really strong EV ecosystem that’s built, uh, with cars that cost half or one third of what, um, Tesla’s cars cost In India, India is, uh, an automobile powerhouse.

Uh, in terms of supplying cars even in the region to, uh, countries around. Uh, and, it’s got a really strong, um, automobile industry. A lot of, uh, international Japanese players manufacture in India to export abroad. Um, I’m not really, really big on cars, so I can’t give you the picture as well as somebody, you know, who is, who’s really into cars would be able to give you. Uh, but I can tell you about, uh, you know, things I’ve noticed on ground with the EV ecosystem and it’s booming, you know, like players are getting ready and India is a, uh, we have three different types of vehicles, you [00:25:00] know, uh, I think this always like catches people abroad off, off guard. We’ve got two wheelers, three wheelers, and four wheelers.

Uh, so people are used to the two wheelers and the four wheelers, but not so used to the three wheelers. Um, so yeah, we’ve got, you know, the equal valent of what iuk tooks in, in the, we’ve got rickshaws. In India and a lot of people commute using them. So, um, we’ve got a huge number of, uh, players already in the two-wheeler EV space. The Tatas, which own the Jaguar and Land Rover brands, um, around the world, they, uh, are building or sort of leading the EV race in india. I think they have 60, 70% market share right now in India. Um, also the thing is that, uh, if Tesla were to launch in India, uh, it would be a challenging gamble even for them because I don’t know if they would be able to, um, you know, set up in [00:26:00] India and have enough of a domestic market, uh, for consumption. They already have a factory in, in China, uh, and they’re already exporting from there, but India will put a hundred percent duty on anything coming from outside. Into the ev automobile manufacturing ecosystem. So landing in India, double the price means it’s not gonna sell. Of course, you’ll, you’ll have fan, uh, fans of Tesla and Elon Musk will buy it at any cost. That’ll be a minuscule segment in India. So, you needs to be able to, Uh, like find a way to set up in india and export from India and build an ecosystem and possibly even launch an India specific Tesla car, uh, to make it work, which is a lot to expect from Tesla to do. 

And even if he does come here, it’s not like, you know, all the other players in India are just gonna be like, okay, you know what? Come take up the market. They’re gonna fight tooth and nail. Tata’s [00:27:00] already working hard on setting up the. Charging infrastructure in India. Uh, Marti Suzuki, which is an Indian Japanese joint venture, is also going to work really hard on like, getting in their own EVs. So, uh, we have smaller manufacturers who are all trying to come in, uh, at the sub $10,000 mark, uh, as far as cars go, and that’s gonna be a really competitive space. Um, but I don’t think, I don’t see why Tesla fits in, you know, there, it’ll have to compete with the luxury guys. Your mercy is all the bmw, all of that. 

Luke: So Krishna, in my own memory of India, uh, last time I visited was 2012. I came out for a month, you know, the absolute chaos in the roads. It’s almost hilarious. Uh, cars, cars and motorcycles on every side of the road. I rode a bike for about half an hour and I’m like, this is just too much for me. So it’s too crazy.

Um, but, you know, honking horns, but the, you know, [00:28:00] the smell of, uh, fumes and kind of gas tanks. So when I come out next month or in a few days time after the episode drops, is it gonna be this ev paradise of smoothly running machinery?

Krishna: Uh, no, no. no. Not at all. I think, I think that would be a lot to expect Also, like India develops different areas very differently, right? Like, um, you know, for example, if you, uh, if you guys pull up a, a photo or video of the CBD in Mumbai, which is called complex, uh, and you look at it and I mean outside of the tuk tuk, you would not be able to tell like where in the world this is, you know?

Uh, so it’s it’s that developed and I think Hbar in fact will be a great, uh, uh, proxy for Uh, the tier one cities in India when you, when you go there. Uh, so you’ll see a lot of improvement in the infrastructure for sure. 2012 was like, you [00:29:00] know, before this government came in, before the ease of business, it was a different world. Corporate taxes were cut in 2019, which was a game changer in India. We went from an effective tax rate of 35% to 25% overnight, um, which was huge. New manufacturing units could come in at an effective rate of 17%, uh, which was unheard of in India. So a lot has happened. You even over the, like, just the last four or five years, uh, in fact I would say come to India every five years and have your mind blown. 

Luke: I’m, I’m really looking forward to that visit. So, uh, you talked about, uh, EVs a little bit under the growth of manufacturing. Just pick back up on Christoph’s. Great question though. You know, what, what are the segments that we should be watching in particular, do you think right now? 

Krishna: See, I think, I think one area that’s going to boom a lot is like the electronic space. So we have a lot of contract manufacturing that’s happening. [00:30:00] Uh, it, uh, we have com electronic components that are getting manufactured. So you have that space that’s, um, you know, really booming. Pharmaceuticals and chemicals have always been something in India that have done really well.

Uh, they should continue to do well. Uh, I am personally more bullish on the, uh, discretionary side of like, uh, pharmaceuticals. So you could have like nutraceuticals, cosmos, you know, stuff like that, which are more interesting. You know, you, um, stuff that you would apply for health and beauty benefits. Which would, you know, traditionally like, uh, be really expensive. But, uh, as you go from $2,000 to $5,000 per capita, um, I mean, being able to spend 10, 20, 30, $40 per, per item, those items, I think would skyrocketed the most. So I’m looking in those places, you know, things that are, um, um, lower in cost, [00:31:00] uh, that could be higher in volume. Things that the develop world looks at, like, um, I mean like a part of their staples basket. But, um, you know, all of India yet doesn’t consider it, you know, uh, part of their staples basket. Uh, one, one great thing I would tell you know, everyone, um, to do is that, um, US viewers are very comfortable with, with, Shark Tank, uh, you know, try and watch the india version of Shark Tank. Uh, that’s a great way to like understand what’s happening in India. Um, you know, it’ll give you access to a different ecosystem, uh, than the public listed space, which is a startup ecosystem. But, um, and I’m not sure exactly, uh, how the viewing, um, rights and stuff like that work as of yet, but I’m sure like for the willing and the determined, they’ll find a way to watch it somehow. Somehow or the other 

Krzysztof: Shark Tank India. Uh, [00:32:00] two seasons available. 

Krishna: It’s, it’s, it’s mad popular. Like you have entire families sitting down over the dinner table and learning what valuations and, uh, growth merchandise value and, uh, you know, uh, uh, price two running multiples are so, It’s crazy. 

Luke: That, that’s fascinating actually. If it’s uh, you know, if it’s like family entertainment or, or almost that’s, uh, cause that’s not How Dragons then, which is the UK version of that show, kind of runs here. It’s for kind, kind of investing geeks really. 

Krishna: yeah. No, in, in, in India it’s everyone, you know, because it’s, it’s become such a big thing and the older generation also wants to learn about it. They don’t wanna be like, you know, unaware. And, uh, in, generally in India, like, um, a lot of families are not nuclear. They still live in, in big setups. So, uh, you have a main television in, the house and generally like, it’s become like primetime television in india, uh, which is [00:33:00] crazy. But it’s, it’s starting the conversation around, uh, business and in India, uh, before this, like, you need, you were either a doctor, a lawyer, or uh, or an engineer or a failure, you know, so like like you had four options, uh, to communicate, which is also why you have so much engineering and medical talent in India, right? Cuz it’s so important. But, uh, this is opening up the business culture in India. Which I think, again, will have profound effects five, seven years out. 

Krzysztof: So quick law is it quick Internet research led me to Shark Tank India on youTube.

Krishna: Yeah. Some of the episodes should definitely be on youTube. Yeah. 

Krzysztof: Hmm.

Luke: I’ll download a couple from my journey out. 

Krishna: I think that they’re mix of hindi in English, but with subtitles, they shouldn’t be difficult to understand. 

Luke: and, uh, not sure I’m putting two and two together and getting five, but when we talked about Tesla, you mentioned like a very high import duty for that brand to get their product into [00:34:00] India. Is it the, is it the same Pretty much across every sector. So for example, like cosmetics and pharmaceuticals 

Krishna: I wouldn’t say like the duties for anything is as high as it is for automobiles uh, uh, automobiles in specific has have always been a sector which have attracted the highest level of duty. what a lot of international brands do, which is what, uh, the government wants, is they come and just set up an indian plant and then just make everything here. So you do land up getting everything that you get internationally, at the same price or cheaper than you get it internationally. So it’s not really an issue except for like automobiles.

Luke: Okay, So you do have a mix of sort of international and domestic brands across most other 

Krishna: Yeah. Even if I had to look at what I’m wearing right now, like I’m wearing croc slippers, Uh, uh, you know, uh, ADA shorts, um, this is Jockey. I don’t know it’s, uh, how popular that is internationally, but like [00:35:00] mostly, you know, you, you’ll have a good mix, especially in governments and things like that. You’ll have more international brands, in fact, uh, compared to like, you know, um, Indian brands. Uh, but yeah, um, it’s a good mix overall. I, I wouldn’t say that it’s, the, duties are like prohibitive anywhere except maybe in like really, really high luxury. Um, and I think what’s also important to keep in mind is that most segments are not such large purchases, right? Um, so like a car becomes a really, really large purchase. So it would hit the duties, would hit you a lot more. Um, and it really goes outside. You know, that, like I said, the top 2% of India will be at. 25, $30,000 per per capita income. so, you are, you are still talking about like one family’s annual income on a Tesla, right? So it’s not a, [00:36:00] it’s not a very like, uh, well suited fit for India as it is right now. It would require some, some like real thought process from Tesla side if they want India as a market. 

Luke: crystal, try to turn this into the Tesla show, but it’s, uh, it’s, it’s India, not Tesla. So I was like, that didn’t land. Um, you, so, you know, you’ve pointed at ETFs as probably being the, the main avenue for an international investor to get exposure to India. Um, are there any good tools or websites you could point an, an investor at, like a good starting point with their own research? 

Krishna: See, you can, what you can do is, um, like an ETF DB will give you all the, uh, ETFs that, that have India, that are India focused. And then you can use like a website like screener.in, if you wanna look up any information about the individual companies. Um, you’ve got the company’s website itself, which, which are all in English. Um, you know, all exchange filings are all in English. So super easy to [00:37:00] like, um, you know, go through the accounting is very simple. It’s not very complex. So, um, you know, if you’re, if you’re used to reading a balance sheet and a cash flow statement and a profit and loss, you’ll be able to understand. And most of the larger companies in India, they put out really nice presentations.

So you’ll be able to get all of your understanding from there. If you want broad based India exposure, you’ll get it through, um, through Nifty. The small cap ETF is a very interesting etf, uh, because it’s sort of giving you exposure to emerging India. Um, so you have that. In fact, why don’t I just pull up the India ETFs and we can just discuss, uh, what’s available so that. You get a sense, right.

On ETF dv there are about 17 ETFs listed as India focused. Um, most of these should be, you know, they’re just India ETFs, which I’m assuming will track either the top 50 or the top heart [00:38:00] rate companies in India. You’ve got like a financial ctf which will give you access. Um, again, that’s a great way to like play the Indian economy because, uh, financials generally will grow at about one and a half times, uh, what the GDP will grow at. Uh, and nominal GDP in India should grow at about 11%. So you’re looking at a pretty substantial return just from financials. Uh, you’ve got one consumer etf, which is the Columbia India Consumer etf. Uh, So you’ve got that. You’ve got. Uh, internet and e-commerce and Digital India, which I find interesting.

The consumer, uh, ETF still has a lot of very large companies, um, and it has a lot of consumer staples, but you will get a lot of exposure again to like auto companies, which will give you consumer discretionary in their own way. So you know, that’s, that’s one way to look at, uh, the consumer [00:39:00] basket.

Uh, e-commerce again, and internet is like all of the newer edge companies. Uh, it’s got, some which are slightly more traditional, some which are more interesting. It’s a good mix overall. Like you’ve got Reliance Industries, which I said is one of the largest companies in India. You’ve got the railway ticketing platform, which is another very interesting, uh, platform because it’s an asset like model. It charges a fee for you to book a ticket on the platform, and it’s the only platform through which you can book railway tickets. Um, so that’s another really interesting business.

Um, make My Trip, which I said is listed in the us uh, not listed in India, India’s largest travel aggregator. So, uh, the India internet and e-commerce CTF is also quite interesting. It’s got two of the larger, uh, brokerages, the, the, most popular brokerage in India’s privately held. , so it, you can’t invest in it, unfortunately, but [00:40:00] yeah. And you’ve got Digital India. Let’s see what’s there. That’s just, yeah, that’s a lot of traditional tech mixed up with some of the newer age companies. 

Luke: And, and the website you’re referring to now is ETFDB.com. . We’ll drop a link in the show notes. Could I, could I double click into e-commerce? Um, my recollection might be faulty. Um, so there’s a big e-commerce brand, so headquarters in Singapore. Sea. Limited, s e a did, did they get thrown out of India about a year 

Krishna: Well, I, I think so. I think so. Uh, their website, I think it’s Shoppee, right? 

Luke: Yes, that’s right. 

Shopee correct? 

Krishna: I I think, um, yeah, it was a complex situation. It, it didn’t really do well. The two largest players, uh, in e-commerce in India, actually both US owned. Um, so you’ve got, uh, uh, Amazon, which, um, is really, really popular in India. Um, in fact, like since you’re [00:41:00] in the uk, you’ll see that actually the delivery times for India are actually faster than those in. Uh, in the uk, not as fast as the US of course, but like, they’re really, really good and they’re real, and it’s really, really popular. And the other alternative is Flipkart, which, uh, I think is majority or fully owned by Walmart. 

So, um, that’s the two big players you’ve got in India. And, uh, then you have beauty and fashion as a separate vertical. And then you’ve got a company called Nykaa, uh, that’s in that, space.

Luke: Is that, sorry, Nika 

Krishna: n y k, aa, I mean, I I never shop on that website, but it’s really, really, really popular. 

Luke: Great.

Krishna: So yeah, e-commerce is really huge. It should again, double in the next five or six or seven years. But, uh, I mean, you get exposure to it through Amazon or. Uh, Walmart only. I think [00:42:00] Walmart at some point was considering, um, doing a spinoff, uh, for Flipkart, which is the, the Indian e-commerce platform, which, if it ever happens and it lists in the US would be a really interesting way to play the e-commerce theme in India. I don’t know what the numbers are, obviously of the company because I don’t track it. Um, as a part of Walmart. It’s too big for me to be interested in. Um, but I think it would be interesting to check out.

Krzysztof: My big picture, top down approach invites, , listeners to take the time to invest in some deep understanding of the history of India and the culture, especially because of its relationship to the English speaking world. And, uh, I, I was doing some, um, research on books, uh, about India, and I came across one that seems to be heavy shoulders about above others. I don’t know if you’re familiar with it, krishna, India after Gandhi, the [00:43:00] history of the world’s largest democracy by Ramachandra Guha. 

Krishna: I haven’t, not really familiar with it, but if you, if you want a big picture book like that, um, which I would say is a little bit more. In tune and aligned with what’s happening in India, um, right now, I will check out India after Gandhi for sure. , but this book is written by, someone who’s an active investor in India. Uh, in fact, his, his next book will be really interesting, which is called Long India, uh, which is his investing thesis on why everyone should be logged on India. Um, but uh, his name is Harsh Madhusudan. Um, he’s also on Twitter at the rate harsh Sudan. One of the best resources on tracking India, and his book is called A New Idea of India. Uh, and I would say it’s, it’s an absolute tree to read. Um, because [00:44:00] both him a and uh, his co-author, they’re very passionate India believers. They’re really young. Um, they often engage with government in different ways. Uh, and I think, um, their viewpoint is shared by a lot of Indians. Um, yeah, uh, their book, because the Amazon used to own a publisher in India, and that sort of went down, uh, so now their book has been picked up by Penguin, so it should still be available somewhere, but in case it’s not, uh, you’ll see it in a couple of months for sure.

Coming back with Penguin. Uh, plus like Long India and just in general, like everything that we discussed, if you want like, uh, a lot of deep insight around stuff like that, easily on your Twitter feed, I think Harsh is a great, uh, great person to follow as far as India’s concerned.

There is another really really good investment book. Um, you know, like you have Market Wizards [00:45:00] in the, us which is really popular as a series. Uh, I don’t know if you, if either of you have read it, uh, but there are, there are like these little interviews of successful investors and it’s an entire series. I think there are about four or five books in it. Um, but we have a version of that in India, as well, I don’t know if you’ll be able to get it, but if you can, it’s exceptional. It’s called Masterclass with Super Investors. Um, it’s really, really good. 

Luke: So fascinating and, uh, long two-part conversation. Krishna, as we sort of bring it to a wrap because I know, uh, it’s getting pretty late your time in Mumbai. Um, would you have any general advice for investors interested in india? What should we be thinking 

Krishna: see, um, you know, as a, again, it depends on how much you want, how much of a segment or how much of a portion of your portfolio India is gonna become. But if you see yourself as someone who’s global macro or somebody who you know, is [00:46:00] a. Uh, a global investor with maybe 50% of your allocation abroad, then I would say it takes some time to understand, the mindset of the Indian person, uh, because it is, uh, it is a slightly different mindset. They, uh, they spend a little bit differently. It’s a conservative culture. Uh, you know, um, there’s not a lot of uh, leverage in the economy. Spend some time understanding, uh, what Indians are like. Uh, if you can, and if you are able to visit India, you know, that’ll give you a very clear picture.

And if you do, please visit, uh, a tier one, tier two, tier three city. So that way you get an understanding of what three different versions of India can be like. Of course, this is a lot. Um, and if you don’t wanna do any of that, then just watch a lot of YouTube videos on india, 

Krzysztof: Oh no. We’re sending Luke out into the field, [00:47:00] so we’re, we’re gonna get photos. 

Luke: and you and you’re, you’re recapping a little bit, some of the conversation from episode one. Now, if you’ve just come straight to this episode, just go rewind and pick up the first half of this conversation where Krishna tells us all about demographics in india and the retail investor mindset. Really fascinating. Start to the conversation. Well, that’s, that’s been a really great two-parter question. I really valued your insight. I’m a little bit disappointed I’m not able to buy individual company shares. I didn’t realize that was the, case. Um, but if, but if the co, if the, country launches a wider range of thematic ETFs, um, that I’ll definitely be all over ETF db trying to see how I can build some international exposure to india in my own portfolio.

Krishna: Yeah, I, I don’t see why that won’t happen because you, you can already see some of them, you know, popping up and, uh, it’s just, it’s just, you know, for them there is no restriction. Right? For, uh, for the bigger, uh, ETF players, [00:48:00] there’s no restriction. They can come in and they can own a lot of the, the stocks and build out as many thematic ETFs.

I think, uh, this conversation is happening sort of at the right, right at the beginning, you know, of this big boom. And I, and I suspect that over these next seven, eight years, uh, everyone’s sort of gonna wake up to India at the same time. You know, and that’s going to be meaningful because, uh, Morgan Stanley predicts that the uh, Indian market will be 10 trillion, um, you know, the stock market and, um, GDP somewhere around seven, seven and a, half trillion. So when, when you’re looking at those kind of numbers, then of course, uh, everybody’s gonna pay attention, right? You don’t have that many economies in the world. In fact, at that point, India would be the third largest, um, economy and stock market to be able to invest in. So [00:49:00] I think, uh, all the US players should, uh, be picking up, eTFs by that point. 

Luke: That’s great. Great to hear. We are not too late to 

Krishna: Uh, no, no, 

I 

think, I think, I think, this is, this is the, the best time. Like I said, uh, the, the population, the working age population will peak around 2030. And then it should be a north of 65% for the decade after that. So you have a good 17 years of prime that’s ahead of us, 

Krzysztof: And the groundwork has been laid, so, right. Yeah. That’s one thing about investors. You know, you see tides shifting for the positive, and some, some people think, oh, I’m too late. Uh, you have to think much longer term. And India becoming the world’s most populous country is not a small thing. The, the connection to the internet is, is even bigger. The, it’s just getting started. So do not get, get, erase that from your mindset that you’re in any way [00:50:00] late. I think Krishna, you’re absolutely right to focus on that. You’re exactly, if you’re listening to this, you’re showing up at exactly the right time. Fashionably late, which means not late, 

Krishna: I, I would, I, I would in fact argue that if you’re listening to this podcast early as a global investor, you’re aware, you’ve woken up, you know, uh, you have the insight and you’ll be perfectly placed for when the instruments drop. You know, you would know all of this. You’d have listened to both our, our two-part conversation or maybe like more episodes by that point. And you would have enough information, uh, you know, already you would’ve read these books that we recommended and you would be, you know, in place, uh, to take advantage of that.

Luke: Fantastic opportunity for, uh, all of us to learn a little bit more about the, uh, the world outside of these crazy US companies that we all seem to follow 

Krishna: Absolutely. Absolutely. 

Krzysztof: Thank you so much. Yeah, thank you so much, Krishna, for taking the time and for all your insights and details. It was an [00:51:00] absolute pleasure speaking with you.

Krishna: It was an absolute blast for me as well, Luke. It was great to catch up again and I’m so glad, uh, we were able to connect and do this and I look forward to doing it again sometime. 

Luke: Fantastic. Well, just, just to close out part two, if you could remind our listeners if they want to read more, um, from you, Krishna, or maybe join Indians and invest globally, where’s the best 

Krishna: Yeah, so it’s on my Twitter account. Um, and the link to join Indians, invest globally. Should be on, uh, my Twitter account as well. Maybe Indians invest globally may, you know, pivot into something else in the future, but I’m always open to connecting on Twitter. Just, you know, drop me a line and if, if it morphs into something else, it will still, you know. Welcome everyone and we are a great place for discussion on businesses in India and around the world 

Luke: Krishna. Remind us of your 

Krishna: is 

Luke: Oh, 

Krzysztof: oh. 

Yeah, 

Krishna: Kris, so b a h i r w a n i k r i s [00:52:00] h.

Luke: fabulous. And uh, you can also find myself and Krzysztof over the Twitters. I’m @7LukeHallard.

Krzysztof: and I’m @7FlyingPlatypus.

Luke: You have been listening to, uh, the 7investing Podcast on No Limit with Krzysztof and Luke, uh, 7investing where it’s our goal to empower you to invest in your future. And with these last two episodes, hopefully invest a little more internationally in your future. Krishna, on behalf of us both, once again, thank you so much for your time. to connect. 

Krishna: Thank you for having me.