My friend, Umesh Kudalkar is someone who I respect and admire. He is outstanding at investment analysis and has deep views on the subject. He is also an active member of the global CFA Institute. He has penned a letter to the PM, which I have pleasure in reproducing below.

Problem

Pensioners, Savers and Investors in our country don’t have sufficient number of investing options that beat inflation. With government pensions going away, the retirees are at the mercy of their children in old age because Bank Fixed Deposit rates don’t beat inflation. Moreover, the high quality stocks that are usually bought by mutual funds are being quoted at very high Price to Earnings Ratios. Their prospective returns may again not beat inflation.

Solution and Proposal

PM could extend his slogan by saying that ‘Make in India and List in India’…. India has the best capital market system in the world. The finance ministry (through SEBI and Stock Exchanges) should call the officials of the leading global companies that sell their products and services in India for a meeting and put forth a proposal for listing their stocks on National Stock Exchange in India if they wish to continue to sell their products and services in India.

For example, we have many multinationals that are listed in their home countries, New York Stock Exchange, London Stock Exchange as well as Indian National Stock Exchange e.g. Nestle, Bosch, Hindustan Unilever.

When we have such a precedent, why not make listing in India compulsory for these global high quality companies such as say Samsung? Even though, these companies would not need any money to be raised in India, the listing of global high quality companies (MNCs) should be made compulsory for the benefit of Indian Citizens.

In addition to the above, the government should also take steps to prevent formation of private subsidiaries in India by listed global multinational companies. This is because, if they list in India, they should not divert value out through private companies shortchanging the Indian minority shareholders.

The logic behind compulsory listing

All of these global companies derive part of their market capitalization value in their home countries because 130 crore Indian consumers consume their product and services. What do the Indian consumers get in return other than the product or service they buy by paying money to these companies? …. Absolutely nothing.

Benefits of the proposal

Pursuing this logic, if these global multinationals are made to list in India, then Indian Pensioners, Savers and Investors would be able to invest in these high quality businesses thereby probably beating inflation and live a dignified life in retirement.

Few Examples of Global Companies that are not listed in India:

Toyota, Coke, Pepsi, McDonalds, Google, Apple, Microsoft, MNC pharma companies … the list in endless

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12 thoughts on “Make in India, LIST in India

  1. No country will ever get Google to list on its exchanges forcibly. It is a stalemate which Google understands, Google is like a utility, no country and citizen can function productively without Google services. They can just call a country’s bluff to stop Google’s services and products. The population will themselves revolt against the government to let them use Google services.

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  2. Mandatory listing of foreign firms used to exist during the pre-1991 era and that was the only reason for all of the listed MNCs we have today in India. This was rightfully a bygone feature of socialist India because it directly interfered with corporate decisions – just imagine an automobile company introducing just one of their brands and having to list the whole parent! While I am of the opinion that the shrinking universe of Indian stocks might become a worrisome trend, and that the lower-than-average standards of India corporate governance will only increase compliance costs (and hence listing costs) going forward, taking the very drastic step of dictating corporate financing decisions is not a good idea. (Perhaps this may lead to the some undesirable adaptation of capital markets, such as the increased use of non-voting shares.) There must be some market solution to increase the attractiveness of listing in India, at the very least forming some kind of common market with a select few countries should not be that difficult.
    It would be nice to hear what you have to say about this.

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  3. Stock markets have RISK.

    So the very concept of asking the retired people to invest in stock market requires a second thought. Who will actively manage stocks for them ?

    Presently, our governments NPS is beating inflation.

    Inflation indexed bonds is what could parts solve the problem.

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    1. Old people term is used very differently. The young ones drive the sales and profits of the MNC brands and products. If they could be allowed to invest in what they are buying, they can build a nest egg for their old age. Now, do you agree? Umesh is not restricting the investment to pensioners. Today’s pensioners are a sorry lot. He is trying to better the lot of tomorrow’s pensioners

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  4. The idea of listing MNCs is suitable for financially savvy people only not the rest of our huge old population.Why not have a separate deposit scheme for seniors paying an inflation beating interest rate which is to be subsidised by the government ?This should have a ceiling on the maximum amount of deposits,say 50 lacs .This kind of scheme will be simple to understand and workable.

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    1. Government should not subsidise anything. I am one of the old persons you refer to. There are many of us out here who will like to own Google or Apple or Samsung or Panasonic or GE or Berkshire Hathaway etc. While I personally like your thought about government creating one more subsidy, what it will result in is children using their parent’s as proxies to get the extra interest. As it is they are doing it big time. We Indians know how to extract the juice from every dry cane

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  5. Why not invest in Varishtha Pension Bima Yojana 2017 and headline inflation numbers.
    One side people want to delist, one side people want compulsory list. It is good to have all companies on the listing. but the intend of asking is very bad just to beat inflation.

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  6. 1. Many may like to own Google or Apple or Facebook or Amazon or Tesla: Lets presume they can be bought on Indian Bourses. But very little will change for the pensioners. Because these Fortune50 cos may trade at valuations, higher than that of Indian bluechips. Fortune50 cos are best managed companies, but, may not be good investments. Because these cannot be bought irrespective of their valuations.

    2. Investing in equities is an ongoing battle for securing more in value than we pay in price. Origin of cos hardly matter for applying this craft.

    3. If the primary objective is regular income, then equities may not be a solution. And if protection or enhancing of purchasing power is the goal, then it can be achieved but not in conjunction with regular income.

    4. Temperament is the single most important factor for investing in equities. & most of it is acquired by error and error. How many pensioners will have the wherewithal (emotional and financial) to withstand initial setbacks.

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