Page 38 - IACC Newsletter March-April 2014 Issue 03

Basic HTML Version

Indian companies may have 2-decade Bull Run in US capital markets: Grant
Thornton CEO
Grant Thornton is predicting an almost 2 decade long Bull Run by mid-size Indian companies, including the much hyped
e-commerce industry, in the US capital markets. While Chinese companies have burnt their fingers in US due to lack of
governance and accounting norms, Stephen M Chipman, CEO, Grant Thornton LLP believes that Indian companies have
an advantage as, "India is a long way further down the road in terms of corporate governance than China and in terms of
dealing with mature capital markets." Chipman, who was recently in Bangalore, spoke to TOI on the bullish future for
bilateral Indo-US business ties. Excerpts:
We have seen fewer Indian companies listing on US bourses compared to their Chinese counterparts. How do you see
this story developing?
The first wave or cycle was just a foray by the very large Indian corporates. The next wave of outbound investments
(including IPOs) from India over the next 10 to 20 years will be very significant. They are going to be, not just from large
corporates, but also from dynamic and growing mid-size Indian companies that want to globalize. And you are starting
to see that. It's a surprisingly low number, but only about $5 billion of Indian FDI annually currently comes into the US.
We believe that over a relatively short period this $5 billion number could, double, triple, and even quadruple. There are
lot of synergies from a sector perspective, whether its technology, healthcare, financial services, these are sectors where
there is a lot of innovation and value that Indian companies can bring into the US markets. And in turn the US markets
can provide capital, experience and access to a very significant mature market place for higher-end goods and services. I
think we are just at the cusp of two-decade long investment run, and we (at Grant Thornton) are investing in it.
And how exactly are you generating this 'excitement'?
Grant Thornton's India and US offices have worked together to create a business unit in the US focused specifically on
inbound investment from India. The unit also helps US companies to come in to India, but its primary purpose is to
create Indian expertise on the ground in the US. Some of our Indian colleagues will come on temporary assignment and
be part of that group. Some of our US people who have been here in India and come back to the US will be part of that
group.
Listed-Chinese companies in the US have come under severe criticism for destroying shareholder wealth. What should
Indian companies watch out for?
On the capital markets issue with Chinese companies, I think there are two things that created the problem. The first
was a structural issue. Ironically this was created by US professionals, you had US legal and accounting professionals
running around China offering Chinese companies to go public in the US, which was a very sexy thing. They had no idea
about all the requirements that were needed to be a public company, no idea about governance and scrutiny. The
second problem, which was a deeper and more of a Chinese problem, was the lack of recognition of accurate financial
reporting. Far too many companies in China have poor controls over their financial reporting. For the majority I would
say — it was just incompetence rather than deliberate fraudulence. India is a long way further down the road in terms of
corporate governance than China and in terms of dealing with mature capital markets. Also, accounting as a profession
in India has been around for over 100 years. India is in a position to avoid a lot that there is in scrutiny and have honest
conversations at the front end with competent professionals, who tell it the way it is and don't let people get into
trouble.
What are your thoughts on the India versus China growth story over the next decade?
India has an opportunity of a 10-year growth spurt that could be very exciting. There is a divergence that is coming in the
priorities of the two countries in the foreseeable future, which didn't exist earlier. In the past it was all about creating
infrastructure, improving governance, improving regulation, getting more people out of poverty, all of which was very
similar. China may have entered a phase of consolidating its scorching growth over the past two decades. Over the next