Indian-born Prem Watsa who helms the $84 billion Toronto-headquartered investment giant, Fairfax, has reiterated his commitment to the country while speaking to ET’s Mohit Bhalla on a recent visit with his family. Watsa spent two weeks and travelled across India during the visit. He also met with Prime Minister Narendra Modi. Watsa waxed eloquent about India’s growth prospects during the interaction but cautioned about global factors and their economic impact. He also said investors would remain attracted to India if there was continuity of policy and government. Edited Excerpts….
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There’s volatility globally, inflation remains high, interest rates are elevated, oil and commodity prices could be on the uptrend. What should India focus on to keep the economy going at its current trajectory?
India has got one big advantage because two thirds of the population is consumer oriented. Countries like China have taken a long time to get that. It is being facilitated by infrastructure development and government spending and all of that. The beauty of consumer spending is that, in the USA it is about 70%, its day in day out right? Consumer spending might drop a little, half a percent here or a percent there, but it brings a lot of stability to an economy.US and rest of the world is suffering from inflation and oil prices and all the things that you mentioned but the interest rates have gone up so much, however with rates coming down now the effect of higher interest rates are going to continue. In March of last year we saw it in the US with the regional banks getting hit. If federal reserve takes it up by 500 basis points there are going to be consequences of that. So I won’t be surprised if there’s a recession in the United States. But in Europe we’re not going to have much of a downturn because it hasn’t gone up that much.
Stock markets have been very high in the US particularly so the US is almost on its own right now. It’s had a great stock market, economy has been strong, unemployment has been low. Whereas in the rest of the world, Europe, Asia and other parts of the world, haven’t had a great stock market or a great economy so you might have a transition to the rest of the world having a benefit. That’s how I’m looking at it
So you continue to remain bullish on India?
India has a young population. 7% plus economic growth. Continued infrastructure building. The roads and the railways. The railways are being modernized which is something huge so I think India is well placed. When he came in (Modi) India was tenth on the scale its now about 5th economically
By 2027 with a $5.5 trillion economy it will take it to the third…US..China and India and I believe India’s growth is sustainable.
Indians can dream now. The potential is enormous.
Do you think as an investor that has put a lot of money in India, policy stability and by that I mean stability of the existing regime will be important for investors to continue to remain attracted to India?
No question! Investors are coming in because of the government’s policies and because of the track record. The investor looks at a country, track record and stability of political structure.
You need everyone in a country to benefit in a democracy with each person having a vote.and so he’s (Modi) done that. Everybody has benefited and that’s what investors expect. Investors will take a lot of comfort from that. I think it’s fair to say that in India Mr. Modi is trusted they say 70% 80% , a comfort factor with the population in terms of the surveys that they do. Investors feel that with Mr Modi there we can trust the economy will continue to do well that there will be business friendly policies and no taxes that are inappropriately put in and that kind of stuff.
You have consolidated your holding in Bangalore airport. What is the thinking behind that?
We just like it. Siemens which has 20% sold us 10% so we are now at 64%. We are thinking long term right . 10 to 20 years. We have 25 million capacity in T1, 25 million in T2 and we are thinking that 25 million in T2 goes to 50 million. And then we have the possibility of a third terminal to take it to 100 million capacity.
The metro is already being built in Bangalore. The structure is quite impressive. And the airport city in Bangalore which is 450 acres. We want to be able to manage build and construct more airports in India because we have shown we can do it right. So with Hari Marar (chief executive officer of Bangalore airport) and all looking at more airports we can build.
Do you think appetite for equity risk in emerging markets would have come down for large investors from US and Canada?
Could well come down now. All of the hi tech companies which is like apple, Microsoft, amazon are all selling at high PE ratios. For any of those companies to grow 10% they would have to add $20 bn in revenue extra or $50 billion in revenue in the case of amazon. Those are big numbers. If history is any guide in the past these things have come down. After the dotcom bust between 2000 and 2003, the Nasdaq dropped 75%, Microsoft dropped that much because PE ratio was too high. I’ve been in the stock market 50 years. You can’t say when it will happen But nothing goes to the sky and these things change and so I see that happening
You’ve been a fan of Mr. Modi. What are your thoughts as he comes close to completing a second term in office?
I have travelled all over the world and when a country is business friendly I’ve seen it work. Here I see it in our country India in spades. When I left there was a lot of socialism. Today that’s gone.
People recognize the advantage of economic growth. I tell my friends in Canada and United States the no.1 country to invest is India though you have to be careful about the price you have to pay. India has had a good stock market so be careful.
But you’ve got economic growth of significant potential. We’ve seen it with Bangalore International Airport, GoDigit insurance company, CSB bank. Thomas cook is coming back now with the travel coming back to India.
The other thing that I thought and I was saying to Madhavan (chairman of Thomas Cook India) that the potential for travel in this country is enormous. I think we have 10 million people coming into India which is like nothing considering the scope of India’s culture from the north to the south and the east to the west. So I’m going to just do a little marketing for India when I get back from my own experience and what I did with my family.
So we’ve got about $7 billion invested. In the next 5 years we are looking at doubling that. We got a few projects already that we’re working on.
