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An Ambition for Growth - India Economic Miracle - Red Ribbon Asset Management

An Ambition for Growth: The Roots of India’s Economic Miracle

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Currently locked in a peculiar species of death roll with her backbenchers, Theresa May still (to her credit) seems intent on securing an orderly exit from the EU by 2020, but most economic commentators are forecasting a long term decline in UK GDP however “soft” the exit terms might be. Price Waterhouse for one are predicting that within a decade of exit, by 2030 the United Kingdom will have fallen to tenth place in Global GDP, behind Mexico and Indonesia and a whisker ahead of Turkey and France (which has a certain irony in the circumstances). And the same survey predicts that by 2030 India will have risen to third place in the global league, treading hard on the heels of China and the United States in first and second place respectively. But unlike the former mother country there is no suggestion that the subcontinent’s remorseless ambition for growth will lose any of its momentum over the course of the next half century.

China had better watch out…

The subcontinent’s economic ambition has been powered by a combination of progressive (some might say revolutionary) economic policies on the part of Prime Minister Modi’s Government (think demonetisation), coupled with a burgeoning and increasingly middle class population fuelling an unprecedented surge in consumer demand. But in a subtle and complex take on that dynamic, McKinsey this month published a fascinating report concluding that India’s explosive growth has just as much to do with interlocking trends in agriculture, urbanisation and mobility.

Take the first element in that triumvirate: agriculture. For decades now (at least the last thirty years), India has pursued an aggressive policy of agricultural self-sufficiency which has not only made the farming lobby one of the most powerful political forces in the country but has also delivered growth rates in the sector that are the envy of most of its near neighbours (indeed, the envy of most farmers anywhere in the world). But despite this, as McKinsey also point out, Indian agriculture still faces a spectrum of uniquely local challenges: severe water shortages alternating with devastating monsoons, combined with often antiquated supply structures and what McKinsey quaintly call a “limited exposure to high productivity practices”: in other words, a lack of investment in the latest farming technology.

That’s where the subtlety comes in…The Indian Government has re-calibrated its agricultural policy to shift the emphasis away from output targets, replacing them with a system of local subsidies designed to buttress farmers’ income (a policy that roused the never less than exuberant President Trump to bring proceedings against India again before the WTO). It was a smart shift in direction too because the new policy will almost certainly double agricultural wage rates by 2022 and, in a characteristically Keynesian frame of mind, the Modi Government are betting that with more money in their pockets India’s farmers will now start investing more in new technology. It can’t do much to stop monsoons but it can, as McKinsey would no doubt put it, “increase exposure to high productivity practices”.

That same factor feeds into the second limb of McKinsey’s triumvirate: urbanisation. More than 200 Million of India’s rural population are expected to move into its urban conurbations over the next 15 years and for those with the instinct to move rather than invest locally, improved agricultural subsidies are giving them a store of money to do it with. And, the Modi Administration is playing to its strengths on this too with a new Smart Cities Mission designed to meet the additional, affordable housing required to cope with resulting surges in demand, reducing urban pollution levels and increasing resource productivity and economic development through enhanced infrastructure programmes. You don’t need to look any further to find the real roots of India’s economic miracle.

And what about mobility: the third element of the McKinsey triumvirate? Well, that’s coming along nicely too with India now expected to become the world’s third largest passenger vehicle market by 2021. It’s not just that the subcontinent offers the same, parallel opportunities and challenges as other western and developing markets, it is offering them with a turbo charger attached. Many of those 200 Million people who are moving from village to town over the next 15 years will want (and get) a car, paying for it with the increased wages earned from working on all those new infrastructure projects; and their family and friends who stayed in the country and invested in new agricultural technology will probably want (and get) a new car too. You need to keep up with your cousins in town!

That, in essence, is what we mean by an interlocking economic structure, and it’s here that we can find the real roots of India’s explosive growth. Just wait to see what happens next…

Nobody understands that potential for growth better than Red Ribbon Asset Management, which has placed India at the very heart of its investment strategies since the company was founded more than a decade ago. With an unrivalled knowledge of market conditions on the subcontinent, Red Ribbon offers a unique opportunity to share in that vast potential.

Red Ribbon CEO, Suchit Punnose said:

At Red Ribbon we are very proud to have been playing our own part in India’s economic resurgence over the last decade, investing in just the kind of projects that are at the heart of the interlocking triangle of growth mentioned in the article: everything from the modular construction technologies now being developed by Modulex so as to deliver affordable housing at the pace demanded by the subcontinent’s urban expansion, through to innovative sustainable energy infrastructure investment. And to see India now firmly established at its place on the economic top table, uniquely well placed to move further forward still is, of course, a particular source of pride for us.

We look forward to continuing to play our part in India’s future, participating to the utmost in the opportunities the subcontinent’s explosive growth has to offer and at the same time providing above market rate returns from our investors in what I am convinced will continue to be one of the world’s most exciting markets for many years to come.

India Private Equity Exits - Red Ribbon Asset Management

Exits and Entrances: A good year for Indian Private Equity

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According to this month’s influential Bain Report, Private Equity Exits grew on the subcontinent by more than 60% in 2017 (India Private Equity Report 2018): an unprecedented $15.7 Billion, up from $9.6 Billion in 2016 and making last year the best ever year for PE exits in India. The number of exits also rose in absolute terms: 211 in all, which marks 7% growth year on year. More importantly perhaps, given this is now the third successive year of growth in exit volumes and value (stretching back to 2015), those familiar with India’s Private Equity Segment will be relieved to move on to brighter uplands, in a sector which has historically been bedevilled by low exit rates.

So what is fuelling the trend?

Well, a lot of it is undoubtedly down to the increasing resilience of India’s Capital Markets and its improved regulatory structures, mostly introduced by Prime Minister Modi’s Government since 2015. Those are both critically important because private equity investment means taking a long term stake in a business and often working with existing management on re-gearing programmes leading to realising asset value. And in India that has often meant investing in small to medium sized family run companies, mostly conservative by instinct and almost all averse to disposing of the business. So without a disposal, just how are you supposed to get your money out? That dilemma lay behind the old (and happily now outdated) adage that in India it was “easy to invest but hard to exit”.

Not anymore though…

In excess of 50% of the subcontinent’s exits in 2017 were structured through Public Markets, including Initial Public Offerings (IPOs) where much improved Market systems and Regulatory frameworks have made it much easier to exit a PE venture by selling all or part of the stake without having to sell the business (even the most conservative family business will be happy with the outcome).

And it’s not hard to find practical examples of how this is all working out on the ground: take for example Tiger Global’s secondary share sale of Flipkart for $800 million last year (making use of the new market regulations) and Apax Partners’ partial exiting of IT giant, GlobalLogic for $780 million: where for the past three years Apax were returning in excess of 20% compound annual growth on its 96% holding in the company, and the 50% stake which was disposed of reportedly sold for 300% of the original investment.

A further factor pointing to the resilience and likely long term growth in exit values is the some $9 Billion of dry powder currently held by PE Funds investing in the Indian sector (according to the same Bain Report), signalling a broad parity with equivalent dry powder levels in 2016 and strongly suggesting that the overall potential and attraction of investments on the subcontinent is likely to remain unabated for the foreseeable future.

Red Ribbon’s Private Equity Fund offers a significant opportunity to participate in India’s resurgent markets, combined with the ability to realise the initial investment after the initial lock in period but well before the ten-year period conventionally imposed by other private equity funds. The Red Ribbon Fund also benefits from the company’s unique and long standing specialist knowledge of India’s markets, with more than 100 advisers and consultants working daily on the ground in the subcontinent’s hotspots helping to identify the best available investment opportunities.

Red Ribbon CEO, Suchit Punnose said:

Private Equity Investment is virtually unique in the long-term vision that it requires for the business platform. Not only a full understanding of the nuts and bolts of the business, but also a viable plan for optimising asset value and a clear, if still long term exit strategy.

As the article notes, I am sure the radically improved market and regulatory conditions brought in over the last three years by Prime Minister Modi’s Government lie behind the resurgence in exit volumes and values on the Indian Market and I am confident too that with three years consistent growth on this key variable, the subcontinent is set to offer unprecedented opportunities for PE Investment.

India Market Report - March 18 - Red Ribbon Asset management

India Market Report – March 2018

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In a move designed to further boost overseas investment, India’s domestic exchanges took a significant step last month in deciding to cut off data feeds to overseas bourses, and to the Singapore and Dubai Exchanges in particular. The Finance Ministry in New Delhi quickly made clear that it supported the move, especially given significant negative impacts of trading in Indian derivatives over the last year which have been widely perceived as destabilizing domestic financial markets: particularly as this trading takes place outside the reach of India’s regulators. In that context, last month’s decision can properly be seen as the latest in a series of regulatory and supervisory initiatives taken on the subcontinent over recent years, each one designed to tighten up still further historic asymmetries in its markets. Far from being unduly protectionist, as some commentators have suggested, it can only be good news for overseas and domestic investors who wish to participate in the success of India’s burgeoning economy.

And there will also be a brand new home for India’s foreign investors: the new International Financial Centre in Gujarat (Prime Minister Modi’s home state), which offers execution with no taxes on either capital gains or transactions and no stamp duty either; it also offers dollar contracts which will effectively remove currency risk on derivatives trading (given transactions in that segment are regularly denominated in dollars); not to mention new, state of the art trading infrastructure as well. So far the new exchange has been surprisingly slow to gain traction (as most new exchange sare) but last month’s announcement should give it much needed shot in the arm.

And the Indian Government is unquestionably right to target overseas investment at the moment.

Take the news this month that US behemoths Blackrock, Oaktree Capital and Elliott Management have all three moved to increase their investment in the subcontinent’s ICT sector, each explicitly recognising the potential for further growth through India’s ongoing digital transformation. The concerted move reflects increased domestic spending on IT technologies so, perhaps inevitably, the sector is also attracting greater interest from overseas private equity funds as well, as indeed are other key areas in the economy at the moment, notably real estate.

On a macro scale, the Reserve Bank announced this month that India’s exports grew by 4.5% in February to USD 25.8 Billion, narrowing its trade deficit to USD 12 Billion, which may also go to explain the increase in returns on Indian Government Bonds reflecting increased demand from corporates and banks to fuel investment opportunities. The 10-year benchmark rate on Government Bonds rose from Rs 96.42 to Rs 96.83 while shorter Bonds (maturing in 2021) were trading at Rs 101.75 (up from Rs 97.81). Call rates on the Indian overnight money market were also up, reflecting a core strengthening in the value of the Rupee.

That combination of market resilience and progressively more robust regulation and compliance models makes it difficult to ignore the investment opportunities that India currently has to offer.

Red Ribbon Asset Management has placed Indian markets at the heart of its investment strategies since the company was founded more than a decade ago: priding itself on understanding more about India than virtually any other asset manager, with a team of more than a hundred expert analysts and advisers living and working on the ground in India’s key areas of economic expansion, seeking out the best and most profitable projects in the daily workings of its local markets. The Red Ribbon Private Equity Fund was launched last year to take full advantage of the resurgence in India’s Financial Markets.

 

 

Red Ribbon CEO, Suchit Punnose said:

Prime Minister Modi’s Government has introduced a series of initiatives that are likely to have a far-reaching impact on the economy. Everyone is familiar with Demonetisation, a bold and for the most part highly successful Programme to rid the subcontinent of its historic associations with unregulated and often illegal market activities. The new GST fiscal regime is equally well known: working progressively to unify markets across India’s vast territories, whilst at the same time reducing overall tax burdens and smoothing the previously over complicated process of Inter State trade.

Less well known perhaps are the equally important initiatives introduced to tighten up India’s regulatory and compliance structure. RERA was an important first stepping-stone in the process: clearing up beaureaucratic inefficiencies and often abusive hurdles to trade. And the Supreme Court has taken up the baton too, with its recently streamlined approach to dispute resolution, giving companies the certainty and assurance they need for effective decision making and removing at a stroke the sometimes sadly deserved reputation which the subcontinent had gained for judicial delay.

So all in all, India is a very different country today than it was even as recently as ten years’ ago. Investors are now much more likely to find Compliance, Legal and Regulatory structures which match Western models with which they are perhaps more familiar.

Last month’s decision by India’s Exchanges to dissuade offshore trading in Indian derivatives (a broadly unregulated activity) principally in the Dubai and Singapore markets, should properly be welcomed as part of this same process of Regulatory tightening. The markets can only be stronger for it and I am pleased that it signals in the strongest way that India’s markets, newly regulated and thriving, are very much open to business for foreign investors.

 

Affordable Housing Programme - Housing for all - Red Ribbon Asset Management

Affordable Housing Programme: the Private Equity Boost

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We’ve heard a lot recently about policy announcements made in this year’s Union Budget, but what about the headline announcements from last year; how effective have they been in delivering the radical economic programme currently being pursued by Prime Minister Modi’s Government? Well, the answer seems to be very effective indeed, particularly in the case of one of those flagship policies, the Affordable Housing Programme.

Designed to address the subcontinent’s severe shortage of domestic housing resulting from a burgeoning and increasingly urbanised population, the programme has its roots in pre-Modi Administrations which had made housing for all by 2022 a key policy objective and with it (this is what proved to be the problem) construction of no less than 50 Million new housing units. It was never an especially realistic target given the escalating cost of urban land, which was making development more difficult; a creaking infrastructure system and lengthy delays in the planning process.

Prime Minister Modi’s Government has worked to cut the burden of red tape and, of course, its infrastructure-spending programme has already gone far beyond the wildest imagination of even the most cynical observers. And then, finally, to ease the fiscal difficulties of price gearing on new urban developments, last year’s Union Budget introduced a 6.5% subsidy for the poorest buyers combined with a licence to take the entire subsidy on a twenty year loan up front (so making the property more affordable) and then allowing withdrawals from EFPO of up to 90% of the purchase price (with the same effect). And then, most importantly of all, affordable housing was given infrastructure status meaning that the cost of borrowing for developers was radically reduced.

So, has it all worked? Have these initiatives actually attracted the type of long term real estate investor, prepared to commit to a lengthy development cycle of the kind inevitably required to provide much needed new homes?

Of course this type of investment, long term and short term shock resistant, has a name: we’re talking about Private Equity investment, and given the past year has seen a remarkable resurgence of Private Equity investment into affordable housing projects, the answer to our question has to be…yes: last year’s Union Budget has made a considerable difference.

The level of overall Private Equity interest, already strong in Indian Real Estate generally, has risen exponentially in the affordable housing segment: consider analysis this from Arun Natarajan, founder of research firm Venture Intelligence:

Affordable housing has emerged as a significant theme among PE-RE (private equity real estate) investors, especially in the second half of 2017, with both domestic investors as well as international firms placing special focus on the segment.”

The majority of residential project launches in 2017 were, moreover, in the affordable and mid-range price segments, with the affordable segment alone accounting for 45% of the overall supply. And last year in India private equity firms made 67 investments with an aggregate value of $6.1Billion. Around 57% of this went into residential projects with affordable housing grabbing the lion’s share.

Modulex Modular Buildings has a unique part to play in this cycle of explosive growth within the Indian Real Estate sector: founded and based in the United Kingdom, the company is setting up a global franchise designed to develop the use of proven British steel modular technology so as to construct buildings quickly, where they are needed most, in emerging and growth markets and in India in particular. Red Ribbon Asset Management is proud to have founded and to be part of the Modulex Project.

 

Growth Economy India World Leader - Red Ribbon Asset Management

As Good As It Gets: The World’s Leading Growth Economy

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Goldman Sachs have just published their Annual Global Review “Global Economics Analyst: As Good as it Gets and it includes some very illuminating predictions for the next two years and, in particular, what lies in store for the small but influential set of Growth Markets which together make up the likely powerhouse of future economic growth. Looking at that small group of countries, Goldman’s are “most positive”, more positive than they are about any other economy in the world, about India where they are  projecting GDP growth of 8.0% in 2018 rising to a staggering  8.3% by 2019.

Those figures might not mean very much on the page (or screen) but compare them with the equivalent figures for with the United States where, even with the kick-start of recent fiscal reforms implemented by the Trump Administration, the forecast percentages are 2.5% (2018) and 1.8% (2019). The United Kingdom comes in at an even more paltry 1.3% and 1.6% for the same two years.

This stark dichotomy between Developed Markets like the United States and the United Kingdom (DM) and Growth Markets like India (GM), is also borne out by Goldman’s individual sector forecasts (contained in the same report), which project an average 5.6% growth across GM for 2018 against a mere 2.3% for DM over the same period; and GMs are also expected to strengthen still further into 2019 with the equivalent average figures being 5.7% against 1.9% for DM (nearly three times as much).

All of this graphically underpins one of the key portfolio strategies by Red Ribbon Asset Management adopted when it was founded more than a decade ago: that no investment portfolio can be considered properly balanced unless at least 10% of its holdings are deployed in Growth Markets and, of course, that means India in particular, which is now likely to return GDP growth at figures nearly double that of its other Emerging Market counterparts, never mind seriously outstripping its closest DM competition).

But having said all of that, GM and DM Markets are still much more connected than you might think: shocks in one can still cause turbulence in the other.

Take,for example, the conventional view that Growth Markets are  much more at risk than other economies from tighter Federal Reserve Policies in the United States, having historically partially fixed exchange rates to the US Dollar with the result that they are constrained to adopt tighter money each time the Fed hikes its rate (as it has just done of course). This perceived vulnerability was graphically illustrated by the severe tightening in Chinese currency markets over the last decade in response to hawkish Fed shocks in the period up to 2016 (and in the light of the dollar peg which was in place over the same period).

So, taking just that one example, what does this underlying feature of connectivity  mean in practice for the future Growth Markets and India in particular? Does it give rise to any additional vulnerability.

Well, In india’s case the answer would seem to be “no”.

Goldman’s Report is “optimistic” that India will be able to weather any such currency storms better than it’s GM counterparts because, following the dollar adjustments of recent years, it is “much more resilient…enabling it to cope better with a gradually tighter Federal Reserve policy”; and in major part that is because of the financial and infrastructure policies of Prime Minister Modi’s Government which have made it much more resilient and shock resistant than its near neighbours in the GM coterie.

So, good news all round…. Perhaps, to adopt Goldmans’ phrase, as good as it gets with India now seemingly set to harvest the benefits of being the leading GM economy, with little or any of of the drawbacks.

It should all make for a happy new year…

 

Red Ribbon CEO, Suchit Punnose said:

Red Ribbon has long held the view that no investment portfolio can be considered properly balanced unless at least 10% of its holdings are deployed in Growth Markets and, of course, for us that has always meant India in particular. So it is encouraging to learn that the latest Goldman Sachs Report on global economic trends (appropriately named “As Good as it Gets”) is still recording historic GM growth at more than double that of Developed Markets and it also forecasts that the disparity will grow wider between the two sectors (in favour of Growth Markets) over the next two years.

I am particularly fortified to read the reports conclusions on India which it finds to be much more resilient than its GM counterparts when it comes to global economic shocks such as that we have just experienced with the Fed tightening dollar rates.

That’s good to hear, even if it’s something some of us have long suspected…

India and the Digital Economy: a trillion dollar opportunity

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Over recent years, three key factors have been driving India’s explosive economic growth: first, a burgeoning and increasingly urbanised population creating unprecedented levels of consumer demand; second, increasingly innovative governmental reforms, designed to reinvigorate the economy; and, thirdly, enhanced globalisation which has made the subcontinent a worldwide technology hub. Red Ribbon Asset Management has increasingly placed these factors at the core of its portfolio management strategies ever since the company was established more than a decade ago.

But now it seems we need to add a fourth factor to the list…

Last month’s influential Sector Report from Morgan Stanley Research identified the increasing digitisation of the Indian economy as a new driver for growth: underpinning a rapidly accelerating move away from the subcontinent’s traditional dependency on cash, particularly in its consumer markets. In the words of Anil Agarwal, Morgan Stanley’s Head of Asian Financial Research:

The country was already on a strong trajectory, but digitisation puts India’s nominal GDP growth on track to compound annually by more than 10% in U.S. dollar terms over the coming decade …the result could be a multi-trillion-dollar opportunity.”

India is already poised to become the world’s third largest economy in absolute terms by 2027, with GDP set to reach a staggering $6 Trillion. And the subcontinent’s equity markets, currently ranked tenth in the world, are projected to jump to fifth with financial services and consumer discretionary stocks leading the way.

Interestingly in that light, the Morgan Stanley Report goes on to conclude that although Indian Companies and markets will (inevitably) be the most obvious beneficiaries of these trends, the global implications for India’s cycle of economic resurgence should not be underestimated either.

The associated increase in e-commerce, consumption growth, financial products and investments could make India a significant market for corporations worldwide…Most importantly, it will become the template for other emerging nations. In fact, there may be lessons for developed countries too.”

But what exactly does digitisation mean in that context and why is it so important?

Well, the cornerstone of the analysis is the Jan Dhan Program which was launched by the Indian Government with the aim of ensuring that every household on the subcontinent would have access to a bank account by 2020. Since the program was launched three years ago,, a staggering 285 Million bank accounts have been opened (from a starting point where 35% of Indian households did not have a bank account at all).

Then there is the recent surge in mobile phone and Internet use. India currently has more than 800 Million mobile phone users, every one of whom is now able to join in the digitisation revolution started by Jan Dhan. And just in case you’re wondering, the United Kingdom currently has 41 Million Mobile Phone users and the United States 266 Million (roughly 3% and 25% respectively of the equivalent figures on the subcontinent).

These are the two demographic factors that Prime Minister Modi’s Government is currently bringing together so as to turbo charge future economic growth in India, encouraging the population to move further and faster towards a cashless market by incentivizing digital payments, because it knows, better than most of its western counterparts that cash transactions can seriously hinder economic growth. No wonder then that Morgan Stanley has identified digital transactions as a key facilitator of a brighter economic future.

India is now demonstrating that it has the capacity, as well as the will to make that happen.

Red Ribbon CEO, Suchit Punnose said:

Last month’s influential Sector Report from Morgan Stanley Research identified increasing digitisation on the subcontinent as a new driver for growth, underpinning, in particular, a rapidly accelerating move away from India’s historic dependency on cash, particularly in consumer markets.

In the words of Anil Agarwal, Morgan Stanley’s Head of Asian Financial Research: “The country was already on a strong trajectory, but digitisation puts India’s nominal GDP growth on track to compound annually by more than 10% in U.S. dollar terms over the coming decade …the result could be a multi-trillion- dollar opportunity” India is already poised to become the world’s third-largest economy in absolute terms by 2027, with GDP set to reach a staggering $6 Trillion by the middle o the next decade. And its equity markets, currently ranked tenth in the world, are projected to jump to fifth with financial services and consumer discretionary stocks leading the way.

So why does digitisation matter so much as a driver to these significant trends and economic projections? We take a look in this week’s newswire.

Read the Morgan Stanley Research Report here:

Read about the Jan Dhan Program here:

 

 

Private Equity and Indian Real Estate: The Bigger Picture

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Private Equity and Indian Real Estate: The Bigger Picture

Stag Investors buy into the “grey market” before a Listing takes place, selling out immediately after the stock is traded in the hope the pre-market has understated the share price. The Stag Investor is the Mayfly of the Financial Markets; here and gone in a moment, paying little if any attention to the actual performance of the company in which he was so briefly a shareholder. Private Equity (PE) sits at the other end of the spectrum: investing for the long run, often taking a controlling position on the board and shaping the company’s future in the hope of long-term gains. If the Stag Investor is our Mayfly, Private Equity is more of a Galapagos Tortoise.

So it is interesting that Private Equity Investment has now emerged as one of the cornerstones of the resurgent Real Estate Sector in India. At the very least it speaks well for the Sector’s long-term prospects.

More or less stagnant up to 2014, the PE contribution to Real Estate on the subcontinent has rocketed in recent years (according to Knight Frank’s latest sector report) and is likely to end the year on a record-breaking high of $4 Billion.

Blackstone, a leading Private Equity House, is now one of the largest landlords of office space in India with its recent deals (struck with L&T Seawood and K. Raheja) racking up more than USD 200 Million each; and in overall terms the cumulative PE investment for the first nine months of this year already exceeds the last five years taken together. As Knight Frank note in their report, somewhat archly, “institutional investors have already smelled the coffee”.

Between 2011 and 2014 the average aggregate PE investment in Indian Real Estate was $ 2.1 Billion; that figure rose to $3.3 Billion between 2011 and 2014 (an increase of more than 57%) and the bulk of it was destined for pre-leased office space and industrial properties, which is suggestive (“strongly suggestive” Knight Frank believe) of a trend for new investors to shy away from the risks traditionally associated with execution, regulatory approval and marketing on more conventional “off plan” projects in the residential sector; all of  which suggests that the business and residential segments of the sector are running on different tracks.

But not so fast. That might also give us a clue for one of the key drivers behind the general resurgence of PE interest in Indian Real Estate since 2014, as well as a pointer for the way ahead.

2014 was, of course, the year that Prime Minister Modi’s Government instituted its radical reform programme for the economy; a programme that came to include the Real Estate (Regulation and Development) Act of 2016 (RERA) and a new regime for REIT listings on the Bombay Stock Exchange, culminating in this year’s Goods and Services Tax all of which have combined to turbocharge real estate investment in this, the fastest growing large economy on the planet. So it seems unlikely that the residential sector will continue to lag behind in the manner it has over the past three years. All suggestions are that the two segments of the sector will start to converge.

The Red Ribbon Real Estate Fund aims to deliver income and capital growth in the medium to long term by investing in real estate projects, and Indian real estate in particular; and unlike almost every other real estate fund it is open-ended, enabling investors to exit on notice after the initial three-year lock-in period rather than have their capital tied down for the long term on a conventional private equity model. The Red Ribbon RE Fund offers a unique blend of long-term growth potential with medium-term liquidity.

Read about Knight Frank Report here: www.knightfrank.co.uk/research

Read about the Red Ribbon Real Estate Fund here: https://redribbon.co/investment-products/funds/real-estate-fund/

 

Renewable Energy Policies in Growth Markets

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President Trump’s White House has withdrawn the United States from the Paris Climate Accords, making good on a campaign pledge to throw the full weight of the Administration behind the US Coal, Car and Oil Industries. So how is that likely to affect Red Ribbon’s policy of pursuing Mainstream Impact Investment strategies in Growth Markets? Renewable Energy Projects are, after all, a core component of that strategy.

Well, the answer is “not a lot” because whatever else might be happening on Pennsylvania Avenue at the moment, the world’s fastest growing economy and the most significant Growth Market on the Planet has just pledged itself to continuing with the “largest energy transformation project in the world”.

Those are the words of India’s Energy Minister, Piyush Goyai, speaking at the opening of the Vienna Energy Forum last Month, and he went on: “Everything changed in 2015 with the Paris Climate Agreement. We must decouple economic growth from environmental impacts and leave a better world….every moment counts.”

India is planning to add 50% more solar and wind power infrastructure than is presently installed in the entire United States. It will also be replacing 770 million street and household lights and, for the first time in the country’s history, it will be bringing access to electricity to tens of thousands of poor rural villages across the subcontinent. As was announced at the Conference last month, India is also doing all of this at a much faster rate than had previously been thought possible (thanks in large part to the enormous infrastructure programmes already put in place by Prime Minister Modi’s Government).

That key dynamic between major economic investment and impact (an unprecedented investment in renewables, tens of thousands of the rural poor receiving a regular electricity supply for the first time and a growing economy) exemplifies what Piyush Goyai meant by “decoupling economic growth from environmental impact”; and the same philosophy is at the heart of Red Ribbon’s Mainstream Impact Investment strategies.

Critics have long maintained that conventional economics has focused far too much on money and markets; creating policies aimed at stimulating the economy without paying any attention to the impact those policies have on the local community and on society at large, still less on the wider environment. In sharp distinction, Mainstream Impact Investment adopts a much more holistic approach, recognising the essential interdependence between the economy, the community, society at large and the environment: because it simply doesn’t make sense to cite interventions with a positive social or economic impact if the net result adds further distress to the environment. And this applies just as much to mainstream business as it does to so-called “green causes”: because both must strive to reduce the negative impacts of creating value for society. That’s what Mainstream Impact Investment means.

So it’s nice to see that Prime Minister Modi’s Government is thinking the same way.

Read the Paris Climate Accords here

Read about the Vienna Energy Forum here

Red Ribbon

At Red Ribbon we understand that the transition towards a resilient global economy will be led by well-governed businesses in mainstream markets, striving to reduce the environmental impact of their production processes on society at large and on the environment as well.

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