Soon, Europe Can Get a Taste of In­dia Con­sump­tion Story

Qatar Na­tional Bank & Zyfin to float Europe’s first In­dian con­sump­tion-fo­cused ETF

The Economic Times - - Companies: Pursuit Of Profit -

Mum­bai: In­dia’s currency swap may have up­set the rev­enue and profit cal­cu­la­tions at com­pa­nies as di­verse as Co­caCola and Unilever last quar­ter, but the en­dur­ing al­lure of a widen­ing con­sumer base con­tin­ues to draw more Euro­pean in­vestors to the world’s fastest-ex­pand­ing ma­jor econ­omy.

Less than a week af­ter a raft of global CEOs ac­knowl­edged that the Novem­ber 8 ini­tia­tive had tem­po­rar­ily af­fected their sales and prof­its in In­dia, the big­gest lender in the Mid­dle East and Africa has sought to take to Euro­pean in­vestors a fund an­chored on In­dia’s con­sumer com­pa­nies such as ITC, Hin­dus­tan Unilever, and Ul­traTech Ce­ment.

Qatar Na­tional Bank (QNB), in part­ner­ship with Zyfin Hold­ings, will float Europe’s first phys­i­cally repli­cated In­dian con­sump­tion-fo­cused Ex­change Traded Fund called QNB ZyFin In­dia Con­sump­tion UCITS ETF. Be­sides pure­play con­sump­tion com­pa­nies, the ETF buy­ers will get to part-own Dabur In­dia, Dr Reddy’s Lab, and Hero Mo­toCorp. The ETF will be listed on the Lon­don Stock Ex­change.

“Our be­lief in the do­mes­tic con­sump­tion story is ex­tremely strong. De­mon­eti­sa­tion is only a blip and In­dia’s long-term con­sump­tion story is at­tract- ing many global in­vestors and we are try­ing to tap into that in­vestor ap­petite,” San­jay Sachdev, ex­ec­u­tive chair­man at ZyFin, told ET. An email sent to Qatar Na­tional Bank’s In­dia of­fice re­mained unan­swered un­til the news went to print.

While the currency swap is at­trib­uted to a tem­po­rary loss of pur­chas­ing power in In­dia, the prospects of a re­vival in ru­ral de­mand — un­der­pinned by in­creased sow­ing area of crops and higher state-set farm-gate prices — are likely to help com­pa­nies that are bet­ting on more peo­ple de- pen­dent on agri­cul­tural out­put to step on to the con­sumer lad­der. This ETF com­pris­ing 30 stocks will al­low Euro­pean in­vestors to buy into com­pa­nies in the health­care, automobile, and housing in­dus­tries. In­vest­ments will carry the risk in currency-value fluc­tu­a­tions.

QNB Suisse SA, a wholly-owned sub­sidiary of QNB, has part­nered with the Zyfin group, an as­set man­age­ment and in­vest­ment ad­vi­sory firm fo­cus­ing on op­por­tu­ni­ties in In­dia, to cre­ate the ETF that will track ZyFin In­dia Con­sump­tion In­dex, de­nom­i­nated in US dol­lars. It will use phys­i­cal repli­ca­tion to track the re­turns of the In­dex as closely as pos­si­ble, af­ter ad­just­ing fees and ex­penses.

“Net ad­justed re­turns could be po­ten­tially much higher than the av­er­age ETF re­turns in Europe or US,” said Sachdev.

In the past five years, the Zyfin In­dex re­turned 13.77% ver­sus 9.89% in Nifty Con­sump­tion In­dex, show data from Zyfin.

QNB has fo­cused on South-East Asia to spur growth. “Our pre­vi­ous tar­get to be­come a Mid­dle East and Africa icon by 2017, was achieved in 2014, so we have up­scaled our aspiration to be­come a Mid­dle East, South-East Asia and Africa bank,” chief ex­ec­u­tive of­fi­cer Ali Al Kuwari was quoted say­ing in an in­ter­view with Bloomberg TV at his of­fice in Doha. “The busi­ness en­vi­ron­ment in South-East Asia is great for us,” he had said.

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