Stephen Jennings, chief executive officer of the Renaissance Group, speaks to Business Standard about the tie-up with Kotak Mahindra and why Indian companies will look at emerging markets rather than the West to acquire assets. Excerpts:
What is the thinking behind the alliance with Kotak?
The era of western ascendancy is very quickly coming to an end because all growth opportunities in the world are in emerging markets. Further, these markets grew in isolation and are not so well-connected. Earlier, most financial intermediation was through the West and most cross-border mergers and acquisitions (M&As) involved western companies. We see that changing very quickly. Two years ago, 80-90 per cent of our deals involved western companies. Today, 70 per cent of our deals do not involve a western party.
What are the challenges for Indian companies looking to buy into Africa?
Africa has dozens of countries and the way you do business in each country varies — the way you treat people, the due diligence involved, the structuring question and political questions. So, you have to have experience in a particular country.
In reality, Indian companies have an advantage over Chinese companies because Africa is very dynamic. You need to be very entrepreneurial, very flexible and focused on costs. The Indian background is perfectly tailored to that.
What are the lessons from the failed Bharati-MTN deal for Indian companies?
Our markets are called frontier markets and are not easy. To be in such markets, you have to be very tenacious and very committed at senior levels. Indian companies that get in reasonably early, have a committed senior management and stay the course will be very successful.
In Africa, which are the sectors where you see opportunities for Indian companies?
Obviously, you have natural resources. Apart from that, anything connected with the rise in gross domestic product. The most obvious is telecom. But we are seeing explosive growth in areas such as financial services as well. Some financial service models that you have in India are very cost-efficient — these are much more relevant than a Citibank model. So, you have a natural opportunity for Indian consumers. And then, there are retail and consumer goods sectors.
One big problem with such deals is funding, where global banks score over regional players. How do you plan to tackle this problem?
We have been the largest supplier and intermediator of capital into Russia for a long time — well over a $100 billion of new capital, year in and year out. So, it is fine to say we have a large balance sheet. But, it is more relevant to look at capital already raised, particularly in early-stage complex situations. When we go into places such as Africa, which are frontier in nature, the number of people who can bring capital becomes few.
So, the focus will be on Indian companies buying into Russia and the Commonwealth of Independent States, rather than the other way around?
Russians started to buy foreign assets only from 2005. As with Indian companies, they went after relatively marquee assets. Then, the crisis came and Russians had to focus on the crisis. As they come out of the crisis, they will get back to expanding businesses. And they will do very few western acquisitions and be focused on emerging markets and natural resources. So, there is an opportunity there as well.
Why was this alliance necessary? Why not keep the arrangement open and flexible?
It is a demonstration of commitment on both sides that we are working together and letting the world and customers know.
