“India is not a straight road,” said Rashesh Shah, who founded Edelweiss Financial Services Ltd. in 1995 and built it into a roughly $770 million group. “It’s not like you can take the US business model and just transport it,” he said in an interview in Mumbai. India “requires investment and patience. You’ve really got to have a 10 to 20-year view.”
Shah’s comments come as the South Asian nation may have overtaken an aging and slowing China as the world’s most populous country, and its benchmark stock index traded last quarter at the highest in 10 years versus the S&P 500. As the US-China rivalry provides a tailwind, Morgan Stanley predicts that India will account for a fifth of the world’s economic expansion this decade.
The 59-year-old chairman of Edelweiss said it’s important to take a “bifocal view” on India, being optimistic in the long run but prepared for short-term upheaval. (As a case in point, the country’s stock market has been rocked since the interview by a short seller report targeting billionaire Gautam Adani’s empire.) India is remarkably stable over time, Shah said, pointing to economic expansion that usually ranges from 5% to 8%, inflation within a set range and a rupee that has steadily depreciated against the dollar.
But that doesn’t mean the journey will be smooth. Rules change often in India’s still-young and evolving economy, forcing companies and investors to adapt, he said, giving the example of inevitable regulatory changes as the country beds in its bankruptcy code. “India tries everybody’s patience,” Shah said.
Unsurprisingly for a founder who created a business in the country, Shah is bullish on India’s prospects. He cites four reasons: a “golden age of compounding” where the economy is doubling in size about every eight years; swift advancements in digital infrastructure; improvements in physical infrastructure as well; and the increasing emergence of entrepreneurs with animal spirits, even in regional cities.
Shah said companies such as Hindustan Unilever Ltd. show a commitment to India pays off. Shares of Unilever’s local Indian unit have surged over decades of being listed in the country. He said some global asset managers still see the market as too small for the effort required after some global firms exited their mutual fund businesses in India.Shah, a marathon runner who did a half at the Mumbai race in mid-January, has had his own difficulties in India since 2018, when a credit crisis caused a plunge in Edelweiss’s stock. Shares are down about 80% since May of that year, and the company announced in 2020 that it was selling a majority stake in its wealth management operation to Hong Kong-based private equity firm PAG.
Shah framed this as the natural divestment of a mature business and stressed that he has no plans to retire anytime soon.
“Nothing is going to change,” he said. “We are just spinning off this part.”
