With more than 20 companies under its banner bringing in revenues in excess of $25 billion, the London-headquartered Hinduja Group is one of the most influential business conglomerates in the U.K.and India. Gopichand Hinduja, co-chairman of the group, accompanied by Ashok Hinduja, the chairman, spoke to The Hindu recently on the Trump presidency’s effect on American businesses, the global economic environment, and the post-demonetised Indian economy.
Donald Trump was elected President of the U.S. with the promise of creating millions of jobs, and of reinvigorating the American economy. What has been the “Trump Effect” on global business?
Politically and economically, we have a certain degree of uncertainty. In the pre-Trump era, we spoke about advancing globalisation. With Trump in the White House, the narrative has changed to protectionism. The scene is changing.
U.K. Prime Minister Theresa May went to the U.S. wanting their bilateral relations to be intact. This would have helped her negotiate better with the European Union. But the U.S. won’t commit to the U.K. before the European Union exit. The complexities are only growing.
Will Trump’s policies have a large-scale impact on India?
India will be in a much better situation because it’s the second-largest democracy and the U.S. wants to grow its defence business in India, and India is one of the world’s largest importers of defence equipment.
Your thoughts on demonetisation?
Well, there was some controversy in the media and in political circles, but a majority of the people still admire (Prime Minister Narendra) Modi. He had the courage to take a political risk for what he thought was for the good of the country. Some people say his planning was not good, while some say they suffered, and many others say the GDP has gone down by one percentage point. I feel this will help to widen the tax base.
Is India Inc. feeling the heat following demonetisation?
Industrialists and business people are scared. It was a shock to the system, and they are not confident of investing more money. Similarly, bankers are worried of investigations. So, where it would lead to, nobody knows.
Then, is the India story hitting a road-bump?
Despite all uncertainties, India is still the best destination for investment because of its long-term potential. If they (the government) make our lives easier and if the slogan ‘Make in India’ is changed to ‘Made for India’, it will make India’s economy stronger.
Wouldn’t policy changes affect ground reality?
Today, when I meet Indian industrialists visiting London, I don’t see happy faces. They all feel nothing is happening. I (myself) don’t get the same feeling because wherever we have invested, the returns have been substantial. Gulf Oil, IndusInd Bank or Ashok Leyland (all Hinduja subsidiaries) are doing good. We need to get the fear out of the business people to help our economy grow.
What is that fear?
The system of black money in sectors such as luxury goods and jewellery ensured that these areas did not grow. Without adequate cash at their disposal, they are heavily impacted. But there is a dire need for long-term balance. We have to have patience.
Ashok: Demonetisation is a bold decision. Nobody has taken such a decision in a vast economy like India. The economy’s cash component has gone into the banking system. Traders used cash to do business. Now, that will also become part of the formal economy. There will be some initial impact as people’s habits will need to change. But we will have to wait and watch. I also feel tax generation will become much better.
What has been the impact on banks?
Gopichand: Banks are flush with funds, but remember that they are also sitting with ₹5 lakh crore worth of bad loans. The credit offtake will depend on economic growth. We haven’t seen big capital expenditure happening. If that had been the case, the credit offtake would have also happened. As a result, banks have money, but are not willing to take decisions. Our group had committed to invest $10 billion in distressed assets. Unless these assets are economically viable, why will any new investor come and invest? To make it economic viable, no bank is willing to take a decision. They are scared to take decisions because of investigations.
Promoters also need to get their skin in the game. Why should banks take all the risk?
Ashok: If the cost of money is, say, 11-12% and unless the buyer makes 5-8% in returns, why will he take the risk? So, who takes that decision of the haircut? And a majority of that is lying in the public sector and public sector banks will not take any decision. They don’t want to get into trouble. If they take any decision to exit, tomorrow they will be investigated.
Gopichand: They (promoters) are scared and prefer to wait and watch. Tell me one infrastructure decision that has been fast and quick. Well, the ease of doing business has improved, but still has a long way to go. Currently, if someone asks me whether I will invest in infrastructure, the answer is ‘no’
We have seen deals happening in infrastructure, isn't it?
We have a power surplus because there is no push in manufacturing. It is in a bad shape. There is no power consumption and thus we can call our production as surplus. If infrastructure projects are held up, we will have accumulated interest on them, making them unviable.
The government says it has periodic reviews for clearances to infrastructure projects.
Who is conducting those reviews? The bureaucrats. If the ones holding up projects for bureaucratic delays are the same ones to conduct a survey, what results do you expect? At least once a month, the PM should review big turnkey projects.
Isn’t PM Modi as accessible to India Inc. as his predecessors were?
I can’t comment on it, but one positive thing is that at least reviews will then be done on basis of what both sides say. Now if you get only a one-sided story, you will never come to know the reality.
How do you solve this problem?
I don’t think I can elaborate much as I don’t want to court media controversy. But a review must represent both sides, and the decision-making process should be shortened. Finally, create special purpose vehicles (SPVs) with all clearances for the stuck projects. We went to buy distressed assets, and no decisions were taken.
What’s your take on GST roll out?
The aim of demonetisation was good, but everybody accepts that the planning and implementation were not up to the mark. Let’s not repeat the same fallacy when GST implementation is introduced.
What are the challenges that Narendra Modi is facing as Prime Minister?
What can he do alone? He can only set the target. His team has to run with him as fast.
The captain has to decide which ideas are worth pursuing. How do we run corporations? We select a good CEO. It’s not necessary that all decisions he takes will be accepted by the board.
But as Hinduja brothers, you are the face of the company. We haven’t seen high profile CEOs of Hinduja Group firms.
We have good CEOs who have turned our companies around. We give them a free hand but we keep a run a tight ship on governance.
What kind of investments are you looking to make in India?
Last week, we signed a joint venture on cyber-security. Yesterday, we decided to go ahead with project development and investment in infrastructure by building headquarters in Vijayawada (Andhra Pradesh). We see great potential in the roads and concession business. We will also invest more in the U.S. Irrespective of what Mr. Trump is doing, our American business is growing.
Your commitment to investing $10 billion in distressed assets in India?
If the policies are clear and I don’t have to come here again and again to change my shoes, yes, we will. Otherwise, no. There is no dearth of money. Everyone knows that India is a good destination with great potential and opportunity. The concern is of delay and how to do business.
Are delays the only concern?
Yes, delay is the only concern. If there were no delays and the policies were clear, we would have loved to make all our investments here. Even today, NRI investments are not treated on par with domestic investments. Is Ashok Leyland an Indian company or a foreign company? The whole world says it is Indian, but when you go to government, they say 51% is foreign as it’s held by Hinduja Automative.
Did you speak to the government about this?
It’s not that we have not pursued. I have pursued with all the ministries for two-three years, before giving up.
The government is upbeat on the private sector in defence.
Since there is only one buyer, favouritism could happen. For example, if there are three aircraft manufacturers and the contract goes to one, the other two will die. So, the policy should be clear that if three or four people are in the same business of defence, they will have to match the lowest, and share the contract between them. Then, nobody is at a risk or else, people will complain of favouritism.
Isn’t transparent bidding the right way of awarding a project to the lowest bidder?
Even after bidding, the lowest bidder may not get the business. You have CII, you have many important industrialists as their members. When these things are happening, they have to select few of them, take advice on policies from people who are doing business. How can those who don’t know how to run a business make policies? They won’t know the problem areas.
