The Hindu Business Line : `Wealth is being created within, outside country'

INDIAN corporates are increasingly turning competitive in international markets. Or so feels Kotak Mahindra MF. Mr Rushabh Sheth, Head - Equity Funds, is of the view that local investors must now begin to identify the names that are capable of performing well on foreign turf.

"Going forward, there will be more than just a few of these... select domestic companies will create more news than you think," he says matter-of-factly.

Excerpts:

Why do you think Indian business is acquiring an international edge?

You can't miss the tell-tale signs. Many local companies, which have cut flab and are encouraged by friendly government policies, are looking at other markets more aggressively than before. At home, their domain has expanded because of increased demand. A section of them is already reaping a rich harvest in terms of outsourcing contracts.

The last five years or so have seen the emergence of certain players in a manner that no body thought was possible. This is especially true for a sector like pharmaceuticals; a number of pharma companies have collectively fortified India's chances in the international arena. Our competitiveness at this juncture is not merely a function of superior IT skills.

Among the more significant developments is the way in which Indian companies are creating capacity overseas through takeovers and other strategic deals.

The past year threw up a few interesting patterns on this front. One thing is clear: Wealth is being created both within and outside the country and this will be reflected in valuations of stocks.

You see, it's not for nothing that Goldman Sachs has ranked us with the other BRIC (Brazil, Russia, India, China) nations.

Can you name a few of these companies?

The list will be exhaustive if our yardstick is followed. But if you are referring to specific sectors, engineering, auto and pharma are the ones that come easily to mind. So do broad themes like drug research and BPO, which have added to India's potential.

To mention a few definite cases, L&T is a good example in view of the fact that global business already accounts for a sizeable part of the turnover. And then, there are stand-alone names that have lately attracted lots of foreign investors.

Tata Motors, for example, can be cited here. Or consider Bajaj Auto, which is responding to a global demand for two-wheelers.

In fact, there is scope for devising a scheme that will invest in only these players. It has to have long-term sustainability of the Indian economy as its underlying principle. Such a scheme will be also be a diversifier of sorts, one that can rev up an investor's core holdings in growth funds.

The companies you talk about can be part of any normal growth fund's portfolio...

True. However, opportunities are likely to arise in a number of areas, ones that professional investors like us should particularly consider. Take, for instance, textiles. Early 2005 will mark the end of the quota system and there will be a spurt of activities in this sector. One feels that local outfits like Arvind Mills and Himatsingka Seide may do well in such an environment.