Grant Thornton is predicting an almost two-decade-long bull run by mid-size Indian companies, including the much hyped e-commerce industry, in the US capital markets. While Chinese companies have burnt their fingers in US due to lack of governance and accounting norms, Stephen M Chipman, CEO, Grant Thornton, believes that Indian companies have an advantage as, “India is a long way further down the road in terms of corporate governance.” Chipman, who was recently in Bangalore, spoke to TOI on the bullish future for bilateral Indo-US business ties. Excerpts:
We have seen fewer Indian companies listing on US bourses compared to their Chinese counterparts. How do you see this story developing?
The first wave or cycle was just a foray by the very large Indian corporates. The next wave of outbound investments (including IPOs) from India over the next 10 to 20 years will be very significant. They are going to be, not just from large corporates, but also from dynamic and growing mid-size Indian companies that want to globalize. And you are starting to see that. It’s a surprisingly low number, but only about $5 billion of Indian FDI annually currently comes into the US. We believe that over a relatively short period this $5-billion number could double, triple, and even quadruple. There are lots of synergies from a sector perspective. Whether its technology, healthcare, financial services – these are sectors where there is a lot of innovation and value that Indian companies can bring into the US markets. And, in turn, the US markets can provide capital, experience and access to a very significant mature market place for higher-end goods and services. I think we are just at the cusp of two-decade long investment run, and we (at Grant Thornton) are investing in it.
And how exactly are you generating this ‘excitement’?
Grant Thornton’s India and US offices have worked together to create a business unit in the US focused specifically on inbound investment from India. The unit also helps US companies to come into India, but its primary purpose is to create Indian expertise on the ground in the US.
Some of our Indian colleagues will come on temporary assignment and be part of that group. Some of our US people who have been here in India and come back to the US will be part of that group.
Listed-Chinese companies in the US have come under severe criticism for destroying shareholder wealth. What should Indian companies watch out for?
On the capital markets issue with Chinese companies, I think there are two things that created the problem. The first was a structural issue. Ironically, this was created by US professionals – you had US legal and accounting professionals running around China offering Chinese companies to go public in the US, which was a very sexy thing. They had no idea about all the requirements that were needed to be a public company, no idea about governance and scrutiny. The second problem, which was a deeper and more of a Chinese problem, was the lack of recognition of accurate financial reporting. Far too many companies in China have poor controls over their financial reporting. For the majority, I would say it was just incompetence rather than deliberate fraudulence.
India is a long way further down the road in terms of corporate governance.
What are your thoughts on the India versus China growth story over the next decade?
India has an opportunity of a 10-year growth spurt that could be very exciting. There is a divergence that is coming in the priorities of the two countries in the foreseeable future, which didn’t exist earlier. In the past, it was all about creating infrastructure, improving governance, improving regulation, getting more people out of poverty – all of which was very similar. China may have entered a phase of consolidating its scorching growth over the past two decades.