Tamil Nadu investment mantra, the best: Kotak’s Nilesh Shah

While the valuation game is something everyone has an opinion about, Shah’s take is simple. “Capital markets have different models to succeed and let the market work. One section of the market will fund the Narayana Murthys, Azim Premjis and the Shiv Nadars. Or it may fund the Bansals, allowing both models to succeed. Who are we to take a call on which is the right model? Let the market decide,” he says.

Shah believes the capital market is brutal, enabling those making the right decisions to rake in money. A wrong decision entails investors incurring a huge loss. But the government or the public must not hope that in capital markets, they will be given crutches to prevent them from a fall. “Here you will fall, you will learn; and you will start running. That’s how markets operate. It is Nature’s way,” he said, likening the creation and destruction to Brahma, Vishnu and Shiva’s works.

Shah tells us, “We have been present in TN, from the beginning, for 20 years. This is a region of India, where savings are quite predominant. In many parts of India, people consider savings only after their expenses have been taken care of, from their incomes. In TN, savings are the first priority followed by spending. Here, investors have a long-term vision and are not looking to make a quick buck. They are happy to understand there is a risk, a return and a waiting period. TN is financially more literate. Also investors are conservative. They secure themselves financially before chasing returns. We have Rs 5,600 crore Assets Under Management (AUM) here, with an equity-debt split of Rs 2,300 crore towards equity, and the remaining Rs 3,300 cr constituting debt. This is significantly above the Indian average.”

Shah argues, “We have a middle India whose per capita income is like Sri Lanka (26 per cent); a poor India with a per capita income, like Uganda (73 per cent) and we have a rich India with a per capita of France (1 per cent). Savings allocated to gold and real estate has seen a shift. DeMon led to greater financial awareness about tax incentives for insurance and MFs and the expansion of Jan Dhan bank accounts, helped amp up financial savings. But financial savings often get wrongly allocated by virtue of disbursing loans to crony capitalists. Thankfully, in capital markets, capital allocation has become efficient now.”

“People like Nirav Modi, Vijay Mallya, or a Mehul Choksi, have succeeded in raising funds from banks. But capital market funding stayed out of reach whereas an Ambani or a Tata can raise capital from the market. We are increasing financial savings and allocating it much better. Our energy dependency at 91 pc on oil will get reduced with the expansion of solar, thermal and hydro capacities. Earlier, an entrepreneur made money in an informal economy and tax avoidance was his profit margin. He had no reason to be competitive. But, now, overall productivity of India is increasing. By formalising, we are making him competent and efficient,” he signs off.