There is plenty of ‘white space’ for Western companies to expand their revenues in India, says Gunjan Bagla in ‘Doing Business in the 21st Century India’ ( www.HacheteBookGroupUSA.com). Your head of sales and your CFO will love the India opportunity, Bagla assures. “Your marketing and human resource team will definitely have to stretch. And you may need to hire many bi-culturally savvy project managers, depending on your business.”

However, pitfalls may be many; “and profitability could elude you for a decade or more if you are not careful about picking the right opportunities,” the book cautions overseas businessmen eager to include India in their footprint.

To help you ‘to profit today in tomorrow’s most exciting market,’ Bagla takes a detailed look at some of the current mega-trends, such as manufacturing, defence, infrastructure, consumer goods, and knowledge-based services. For instance, manufacturing boom, he says, gives rise to three types of opportunities. “First of all, if your company supplies any products, equipment, or services to manufacturers, you may find a very ready market in India. Second, if you want to benefit from India’s manufacturing prowess, you may find a good vendor partner.

Third, your company may benefit from setting up its own facilities in-country.”

A growing population, rising per-capita income, and an expanding middle class have created a ‘perfect storm’ of increasing demand for almost every type of consumer product or service imaginable, the author observes. “Whether your company sells consumables, durables, or services, few locations will let you grow your top line to the extent that you can in India over the next decade.”

While it is smart of Western companies to use India for knowledge work to save money and expand capacity, what is smarter, in Bagla’s view, is to leverage India’s resources to reduce time to market, and to increase the rate at which new products can be launched.

A compelling case.

‘Maximum pessimism’

The point of ‘maximum pessimism’ is when you should invest says John M. Templeton in the foreword to a book that captures his style: ‘Investing the Templeton Way’ by Lauren C. Templeton and Scott Phillips ( www.tatamcgrawhill.com).

“In almost every activity in life people try to go where the outlook is best. You look for a job in an industry with a good future or build a factory in an area where the prospects are best,” he writes.

If, however, you are selecting publicly traded investments, you have to do the opposite! Uncle John’s motto is simple: Buy when others are despondently selling and sell when others are avidly buying. Though this dictum requires the greatest of fortitude, it can pay the greatest ultimate reward, he assures. Remember: “Bull markets are born on pessimism, grow on scepticism, mature on optimism, and die on euphoria.”

The authors advise bargain hunters never to adopt a one-stop investment strategy that is based on well-told stories, whether the stories come from a friendly neighbour, a talkative barber, or the smartest analyst. “Bargain hunters must rely on their own assessment of whether the stock price is far enough below what they believe a company is worth. This is the sole guiding light on the horizon, and scepticism is the compass.”

An eerie analogy, in this context, is that buying stocks solely on the basis of stories about companies is like letting the mythological sirens entice you onto the rocks of the shoreline. “That rocky shoreline is scattered with the bodies of investors who listen to stories.”

Recommended read.

Six-step China strategy

Investing in China is more than looking at the financial promise and performance of individual stocks, opines Robert Hsu in ‘China Fireworks’ ( www.wiley.com). He says that to really profit from the China miracle, your investments must take into account the way the Chinese people live and work, the way they structure and develop their businesses, and the expectations they have for becoming a significant component of the global community. Hsu is aghast that investors of all types have rushed to capitalise on what appears to be China’s rapid rise, but without the proper preparation.

Many investors have already been burned by putting their trust in advisers who don’t understand the unique dynamics of investing in China, he bemoans.

“I’ve seen many investment advisers evaluate Chinese companies, or those companies doing business in China, using the same metrics they apply to American or European companies.” This is a serious error, the author avers, because the essence of what makes China the most extraordinary investment opportunity in the world is its uniqueness.”

The final chapter lays down a six-step China strategy, beginning with the gathering of accurate information about China. Pick a day that you can dedicate to spending an hour reading about current events in China, Hsu suggests. Step 2 is to identify industries that are growing. “Consumer trends, demand for services, and commodity requirements will provide the bedrock for your portfolio.” Then pick industry leaders, make your buy, and be ready to get out and collect your profits. Lastly, keep your eyes and ears open, not only to news and announcements but also to advertisements.

Insights that should work.

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(This article was published in the Business Line print edition dated August 24, 2008)
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