GQG's Rajiv Jain: India's earnings growth is the best among EMs over last 5 years

Well, that’s a million-dollar question, as they say. I am not so sure. I feel that markets typically climb the wall of worry. And there's always angst about having run up so fast that they could always be paused. But if you take a slightly longer-term view, I feel that India still has quite a runway of progress for a three-year horizon. So the valuations are maybe a bit extended, but not crazy because you always have to look at the runway in front and the runway is fantastic. If I look globally, the two markets that I feel have the right dynamics for very strong returns, after the US, are India and Indonesia.

There seems to be a common misperception about this group. So if you look closely, based on our numbers, between 5% and 7% EBITDA is all that is needed for maintenance, capex. The rest of the capex is growth capex, which is much easier to tone up or tone down based on the opportunities. And if you look at India today, the opportunities are very, very wide. And if you look at, for example, the renewable platform, Adani Green has already become the largest renewable green platform in the world. Ørsted, the big Danish company, is struggling. So capital is not a problem in the vast majority of these.

It would be more attractive to outside investors, because of the mining exposure, etc. But as the markets have shown, there is more than enough appetite. So that was not a concern. Even by the way, in March, April, when we first initiated, as we did the math, we found that capital is not a problem. When you are generating these kinds of basically high-teen underlying IRRs capital is always around.

They own six airports and Navi Mumbai will probably be done by the end of this year, or maybe early next year. It will become the largest airport as such in the world with passenger volume growth running in the mid-teens. And there are other sorts of abilities to monetise around that. The Zurich airport has monetised a lot of different things around Zurich. Same thing for Paris and Frankfurt. So there's a lot of ability to monetise not only the passengers but also the revenue that can be generated by the ecosystem. If you put reasonable valuations, at that point last year, when we bought the first tranche of Adani Enterprises, we thought the airport itself was worth more than the company. The copper business is coming online probably in six months; that could be a billion dollars plus EBITDA alone.

When you add these up, we thought we were getting everything else for free. Not to mention, if you look at Gautam Adani’s track record, his track record is phenomenal in terms of creating value. Just the airport itself was worth more than enterprise, we thought. And now, if you look at the other things that have come up, the funny thing about some of these names is that their earnings growth in the last 12 months, since our first investment, has been quite fantastic. I mean, versus what we were expecting in March and April, the delivery has been quite remarkable. I think that's an important part because the whole infrastructure space in general has delivered very strong returns.

Both HDFC and HDFC Bank have been some of our core holdings for a long, long time.  I always joke around that if you look at these two names, that makes me look a lot smarter because we bought them and we didn't have to do anything. And they kept compounding. We like management, where we kind of take a backseat and they do the job, and these were some of those. However, we just thought they were better opportunities last year. So we exited HDFC Bank. And I think some of this is simply a kind of transition issue that we are facing. That was a big merger; more than any structural problems, we don't see any structural issues; it's more of a transition issue in terms of two big entities having merged.

But in our case, we just had, as I said, a limited amount of dollars where we thought we could invest. So we look for the best bang for the buck. And we thought SBI has a far bigger disconnect, than HDFC, which is a very, very high-quality franchise, and it's very likely we will own it somewhere down the line again.

We were not involved in any deals at all. So I think it's kind of amusing to see almost every deal in which our name comes up. So there's no point denying every deal because there's a deal every week. So no, we were not involved at all. We didn't buy a single share.

We have looked at them. But at this point, it will be sort of inappropriate to specifically comment about names where we don't have existing positions as such.

China is confusing because the stock prices have come off quite a bit. Despite a lot of policy issues, political aspects have not gone away. So we have not increased our China exposure. We are extremely underweight in China. We only have 4 or 5%, China, I mean, that should give you some context; that's an EM; we have no exposure in the global or international book as such in China, and four or five years ago, we used to have a lot.

But we do feel that there is a geopolitical aspect that is playing an important role in terms of how people will perceive China. For example, if Trump wins, I think there's a high chance of escalation geopolitically between the US and China. And that could impact foreign investment in China or their reluctance to invest further. I think there are things on the horizon that kind of give us a little bit of pause. And Trump has already announced some of these things: that he is going to increase tariffs, and so on. So I think the sabre-rattling will increase, which is a little bit of a problem.