The Indian companies dominating emerging market returns

Sara Allen

Livewire Markets

Investors looking for resilient companies could start taking note of the growing number of multinational success stories domiciled in India.

Glen Finegan, Lead Portfolio Manager at Skerryvore Asset Management, is no stranger to the opportunities within the Indian market. Over a quarter of Skerryvore’s portfolio is exposed to Indian-domiciled companies, such as Infosys Limited, healthcare manufacturer Cipla or motorcycle manufacturer Bajaj Auto.

While the exposure may seem large, Finegan notes that the companies held typically have diversified global revenue streams that are not dependent on the performance of the Indian economy.

One example is Tata Consultancy Services.

“Over decades, Tata’s gradually upscaled its offering to the point now it competes head-to-head with the biggest IT businesses anywhere in the world. Any giant contract coming up, a cloud migration project here in Australia or in the US, TCS has as good a chance of winning it as any global player.”

That said, the Skerryvore team has still located opportunities which are more dependent on the domestic Indian market, such as in the highly unique banking industry in India.

In this edition of Expert Insights, Finegan discusses some of the Indian companies held in Skerryvore’s portfolios and the opportunities he sees going forward.

Key take outs - the companies discussed:

  • Tata Consultancy Services: offers IT services, business, and digital solutions to clients worldwide.
  • Cipla: India's third-largest pharmaceutical company providing over 1500 products in more than 80 countries.
  • Bajaj Auto: Indian domiciled manufacturer of motorcycles and three-wheelers.
  • HDFC: private Indian bank with a network of 6,342 branches and 18,130 ATMs in 3,188 cities.


Approximately a quarter of the Skerryvore portfolio is invested in Indian companies. Can you discuss the opportunities you see in this market?

Roughly half of our exposure to India is via what we would call successful multinational companies. So, positions in Tata Consulting Services and Infosys, which are global-leading IT services businesses that sell their services all around the world and earn US dollar revenues. That would be about 10% of our exposure to India, coming up on half.

Stock focus: Cipla

We have a very large position in, in our view, the best-governed pharmaceutical manufacturing company in the country, in Cipla. Cipla has two main business lines. It has a domestic-branded, generic business, which sells medicines to the Indian population.

That's a steady-growing, compounding business, but it also sells drugs overseas. It has a particular expertise in respiratory medicines, treating asthma and the like, and they're in the process of launching a number of asthma drugs in the US that increase the US-dollar earnings of the business.

Although the headline exposure to India looks very high, I think if you look at the revenue streams coming into our businesses in India, there's a lot of multinational revenue in there. India has created a number of very successful companies that have succeeded beyond India.

Stock focus: Tata Consulting Services

Let me highlight Tata Consulting Services. TCS, as we call it, is a IT outsourcing provider. It operates out of India, and its origins are as a low-cost... Indian wages being lower than US wages, being able to provide low-cost services. Over decades, Tata has gradually upscaled its offering, to the point now, it competes head to head with the biggest IT services businesses anywhere in the world.

So, any giant contract coming up, a cloud migration project here in Australia, in the US, wherever, TCS has as good a chance of winning it as any global player. That's an example of a business that's moved up the complexity curve, if you like, and now has emerged as a global-leading multinational business, from emerging-market beginnings.

We like businesses that have been able to demonstrate that ability to constantly improve. With that has come pricing power, with that has come great returns. I guess you could add that, obviously, a lot of TCS's costs are in Indian rupee and of course they charge in dollars. That's another nice way of protecting yourself from the potential for the Indian rupee to be weak over time.

Stock focus: Baja Auto

Bajaj is one of the leading motorcycle companies in India. We think it's family-controlled, but in addition to having a large franchise in India, it's one of the biggest motorcycle manufacturers in the whole of emerging markets. I think it's the number one motorcycle manufacturer in Africa, for example.

They've got positions in all sorts of emerging markets, so it generates quite a lot of ex-India revenue over and above its good position in India. We like Bajaj because in addition to having its legacy business, it's transitioning to offering electric versions of two-wheel products that it makes.

I think, in India where it's harder to see the EV infrastructure rolling out, just the nature of Indian cities as such that rolling out the type of infrastructure you need for four-wheel EVs is more challenging, but two-wheel EVs are much easier to charge, lower power, all that stuff. We think EV two-wheel adoption in India, particularly if oil prices are going to stay high, could be a big, new driver for the Bajaj franchise.

Stock focus: HDFC 

India is a little unusual in the sense... well, unusual compared to a developed-world country, that round about 70% of the banking system is still controlled by the government. So, you have State Bank of India and lots of other government-controlled banks. Only 30% or thereabouts of banking assets in India actually sit within privately controlled banks, or private non-government banks.

We really like identifying well-run, conservative, privately controlled banks, where they compete with the government. Historically, most of the bad loans tend to end up in the government banks, that's the nature. Sometimes, it's to do with corruption, sometimes to do with the government may want to stimulate certain parts of the economy that maybe private-sector lenders might feel reticent about doing.

There are many, many reasons why well-run private banks are able to prosper by targeting the higher-quality parts of the economy. India has a very large and young population, and growing population. One of our holdings, HDFC, is the leading mortgage provider in the country, and mortgage demand has been strong, continues to be strong, and is likely to remain strong for a long time to come.

It's driven by household formation, young people getting together, wanting to buy their first home. It's nothing to do with people buying their fifth investment property. There's none of that. These are genuine, demographic-driven trends that we think mean the outlook for a well-run private lender in India, it looks strong.

It's a pretty broad exposure we have to India, but that 27%, around half of it would be these US-dollar-earning businesses. So, it's a combination of global and local, our exposures in India.

Far-sighted and fair-minded

Skerryvore Asset Management is a boutique of BennBridge, the UK arm of Bennelong Funds Management. The team are fundamental, bottom-up investors seeking to create high conviction portfolios of reasonably valued, high-quality companies that are exposed to, or operate in, emerging markets. For more insights, visit Skerryvore's website.

This information is issued by Bennelong Funds Management Ltd (ABN 39 111 214 085, AFSL 296806) (BFML) in relation to the Skerryvore Global Emerging Markets All-Cap Equity Fund. BFML has appointed BennBridge Ltd (‘BennBridge’) as the Fund’s Investment Manager, which is authorised and regulated by the UK Financial Conduct Authority. BennBridge is a Corporate Authorised Representative of BFML (AFSL Representative No. 1281639). All regulated activity relating to portfolio management, including execution of trades, takes place within BennBridge as the regulated entity. Skerryvore Asset Management LLP (‘Skerryvore’) is a boutique asset management team. The company is majority owned by team members, and minority owned by BennBridge. Skerryvore’s personnel are assigned to BennBridge in order to provide portfolio management and trading activities. Skerryvore and BennBridge are collectively referred to as ’the Skerryvore team’. This is general information only, and does not constitute financial, tax or legal advice or an offer or solicitation to subscribe for units in any fund of which BFML is the Trustee or Responsible Entity (Bennelong Fund). It is not intended for UK recipients, and financial promotion must not be acted on by persons in the UK. This information has been prepared without taking account of your objectives, financial situation or needs. Before acting on the information or deciding whether to acquire or hold a product, you should consider the appropriateness of the information based on your own objectives, financial situation or needs or consult a professional adviser. You should also consider the relevant Information Memorandum (IM) and or Product Disclosure Statement (PDS) which is available on the BFML website,, or by phoning 1800 895 388 (AU) or 0800 442 304 (NZ). Information about the Target Market Determinations (TMDs) for the Bennelong Funds is available on the BFML website. BFML may receive management and or performance fees from the Bennelong Funds, details of which are also set out in the current IM and or PDS. BFML and the Bennelong Funds, their affiliates and associates accept no liability for any inaccurate, incomplete or omitted information of any kind or any losses caused by using this information. All investments carry risks. There can be no assurance that any Bennelong Fund will achieve its targeted rate of return and no guarantee against loss resulting from an investment in any Bennelong Fund. Past fund performance is not indicative of future performance. Information is current as at the June 2022.

2 topics

1 contributor mentioned

Sara Allen
Content Editor
Livewire Markets

Sara is a Content Editor at Livewire Markets. She is a passionate writer and reader with more than a decade of experience specific to finance and investments. Sara's background has included working at ETF Securities, BT Financial Group and...

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.


Sign In or Join Free to comment