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MUMBAI : Private and public markets in India are expected to fare significantly better than other emerging economies despite the fear of a global recession and domestic headwinds, according to veteran investment banker Ajay Garg, who is also the founder and managing director of Equirus Capital. Edited excerpts:

What are the opportunities in your view in the current scenario where a global recession seems imminent?  

First, on the domestic side, we do not think the inflation situation is out of control or as shocking as the global environment. We are approximately 1% over our outer target limit compared to the developed world, which is 6-7% overshooting its target. Second, our central bank need not be as aggressive as the developed world. Third, our recovery seems to be firming up. While we may see some temporary softness, it will still be the highest in the world. Fourth, our political system is stable and expected to remain so in the near term, which highlights the ability to undertake meaningful reforms in the long term. Fifth, global rating agencies have reaffirmed our ratings at investment grade, and there is no rating threat as envisaged in the past. Overall, I would conclude that there are a lot of opportunities especially given that India is looking to build itself as a manufacturing destination. India remains an attractive investment destination, and when the dust settles, we would think there will be a meaningful flow of capital into India. 

Do you see the corporate sector altering its capex plans as it braces for a recession in the West?  

India’s capex is more governed by the strength of its domestic consumption and, to a lesser degree, by the global demand. Having said that, there are two structural shifts in global manufacturing – high energy costs in Europe and disruption in eastern Europe, and global corporations want to work with China plus strategy. When the last disruption happened, India and Indian cos weren’t ready, but now given the government focus is on the scale of Indian companies, we think they will benefit a lot. At this point, capacity utilization is still modest at 72.4% (December 2021) but improving from the low of 47.3% witnessed in June 2020. Capacity utilization peaked at 80-83% between 2010-2011, post the global financial crisis, when India’s growth recovery was strong. 

The valuations in the listed space have moderated substantially. Will this impact private markets?  

Private market deals were dominated by the digital economy funding to create the next unicorns, as the correction is severe in a few of the stocks that got listed there – the impact here would be very severe, and a new valuation matrix will emerge for the space. In all other sectors, we haven’t seen such a deep correction as witnessed by most of the IPOs we did last year. Therefore we don’t see much impact on the private market.

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