Taylor Swift and Coimbatore

Behind every successful Taylor Swift fan there is a doting and thunderstruck set of parents. Parents of Switfies are subjected to hours of her music and need to compete with her for mind share of their children. In my hundreds of hours (at times it feels like lakhs) of living with Taylor in the background, one song surely stands out. Though entitled Endgame, we best know this hit song for two words: “big reputation.”

I thought that the notion of reputation or repute is an apt concept to reflect upon my two weeks just spent in India.

Why reputation?

When speaking to international investors looking at India, there are two issues they raise: High valuations (loco multiples) and unease over corporate governance in India (credibility).?

I will not dwell much on the former topic. Suffice it to say that India was and will trade at a premium, relative to most markets, certainly emerging markets. At some level, for foreign investors, India is an act of faith. You either believe in the long-term India growth story, or you do not. So far, the patient faithful have been well rewarded. India has, over time, been only second to the USA as far as stock market returns go.

In my travels to Gurugram, New Delhi, Aurangabad, Bangalore, Chennai, Pune, Mumbai and Coimbatore, I witnessed the growth story. I met companies surfing the proverbial wave, with all of the local challenges and the potential global headwinds.

To see is to believe.

Based on what I witnessed in these eight cities and the kilometers of amazing new highways I travelled on in Tamil Nadu and Maharashtra, investors will continue to be blessed by India. It will not always be plain sailing. The peaks will be followed by occasional troughs. But the long-term upward trend is clear.

There will be challenges. This is India. India is the master of the shuffle – two steps forwards and then one backwards. For foreign investors not to ponder the tests that India faces is folly. Indians, who live in India, are quite sanguine, yet also realistic. Foreigners, however, often get caught up on the occasional setback, overlooking the overall forward trajectory.

Reputational issues will continue to plague India.

Like any other country, India has had its share of corporate scandals. Netflix even has a series called Bad Boy Billionaires: India. Every market has its corporate villains, be it Enron, Lehman, Worldcom or Tyco. My sense is that India is no worse than the paragon of corporate governance. In recent months, the Hindenburg report brought such issues to the forefront.

Things are improving, thanks to reforms like the bankruptcy law, the introduction of GST and RERA, which has markedly improved real estate. More will be done. And as columnist TN Ninan recently noted, India has “sharply improved macro-economic management.” This has reduced inflation and made the Rupee more resilient.

India has actively worked to improve the ease of doing business, though results have been mixed. As one young SME founder I met with noted – whereas the ease of opening a business has improved, the ease of doing business has not. A senior executive at a major Indian conglomerate lamented that whereas measures like UPI and other technologies harnessed have made personal transactions and interactions with the state (like tax payments) easier – that same efficiency has not been brought to bare at the level of SMEs. They are key to India’s economic trek to a $ 5 trillion economy and beyond. The Babus are not going to give up power so easily.

Sadly, a large reputational iceberg looms.

The unfolding (imploding) Byju scenario will set India’s standing back. This will provide fodder for India's critics. In recent years, a formidable and solid startup ecosystem has emerged. This ecosystem will survive the current headwinds and come back stronger. It will endure the Byjus shambles.

The obliteration of billions of dollars of capital is not a pretty sight. Byjus and a slew of other corporate shenanigans that are being uncovered are not unique to India. It takes many to tango. The VCs who rashly threw money on to the bonfire (especially the global ones) did precious little to shape corporate governance. They should also be held accountable. They helped create the Indian variety of a global phenomenon. I do not seek to defend start up founders who floundered. But we must recognize that the “punch bowl” that decades of low interest rates provided encouraged many anomalies. If FTX, WeWork and Theranos taught us anything, it is that the reckoning and accounting that awaits will focus on some actors (normally the founders). Others will quietly skulk away. I suspect the most famous name VCs will pull off a great escape and live to repeat these excesses.

But I digress.

The point I want to make is that there is so much more to emergent India than VC fueled startups. In Aurangabad I visited three of Sterlite Technologies plants. Lo and behold, the city offers more than the Ellora Caves. In Maharashtra a global fiber optics company is being built. To see is to believe.

In Coimbatore I visited Alphacraft, a small company making aluminum die casting parts for the likes of Porsche and Williams Racing. These are very demanding customers. This is one of many such companies in Kovai. I also visited impressive factory of KPR Mills. Incredibly, this company which supplies the likes of H&M, was founded 40 years ago by the son of a farmer. Today it is a listed company.

The city of Coimbatore embodies the spirit of the state of Tamil Nadu, which is becoming an electronics manufacturing hub. It also demonstrates the potential of SMEs. The future of India is not just its big conglomerates (like Tata and Reliance) and cool tech startups. It is also with the emergent Mittelstand of India. Germany’s reputation of being synonymous with manufacturing excellence and its formidable economy were built by its Mittelstand. Coimbatore exemplifies the rise of India’s Mittelstand.

Every time an Indian SME exports to a global client, the country’s standing and reputation is built. The big reputation of a nation is built by many good reputations forged by small companies.

India should celebrate its unicorns a little less and embrace those companies making their mark in manufacturing excellence a whole lot more. There is much to proclaim.

I encourage international visitors to tour places like Coimbatore and to delve into the exciting stories of India's emerging businesses.