Soon, Europe Can Get a Taste of India Consumption Story
Qatar National Bank & Zyfin to float Europe’s first Indian consumption-focused ETF
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.