which is typically quite calibrated, they are free cash flow positive, very strong balance sheet and very strong revenue visibility. One area of where we get a little bit disappointed is that the earnings is more steady or it is lower than what probably market earnings is, but the truth is that they have been delivering around 10-15 percent earnings, which is above than the market average. Q: Apart from Bharti Infratel , any other large stocks in India which you have in the top-10 or the top-15 holdings right now? A: We like Power Grid, so we have quite a bit of exposure on Power Grid side. We also have exposure on the port assets. So, we like Adani Port, very quality assets and they should also benefit if the economy improves. Q: Within the sectors, I was looking at your fund. Again, the utility seems to be the biggest overweight for you or the most favourite sector for you. Within the utility space in India, what are the stocks that you can look to invest in? A: Many times the line between utility and infrastructure blurs out. So for example, transmission stocks, you can say as an utility as an infrastructure. So that is why Power Grid is something which we like a lot. We like the utility LNG gas terminals, Petronet LNG . So, that again infrastructure cum utility. These are some of the names which we like a lot. Q: While you run a very large Asia fund, I am sure you have got experiences from other Asian markets as well. But largely, investing into Indian infrastructure stocks has been a bit painful in terms of returns for investors like you. What sort to experience have you gained from other Asian countries and why have you then chosen just select investments into India? A: The positive side is that India needs a lot of infrastructure. Therefore, the need to spend a lot of money in infrastructure and also the growth for the traffic and the volume is typically quite good or better than most of the other markets. It is a classic paradox is that either the last government or even the current government is still struggling to put a transparent regulatory framework which is the touchstone of any good infrastructure asset. So, you need to have a transparent regulatory mechanism. On top of that, you need a very liquid bond market, you need a real cost of capital, which is still the highest within Asia, even higher than Indonesia. That something which needs to come down. Last but not least is that even the regulator, the public opinion has to be less hostile to private sector making money on reasonable return on infrastructure because this is a long dated asset. You take a lot of risk. So, within Asia, if you see the markets where the regulatory mechanism is good and people understand that is definitely Australia, New Zealand is one of the best ones. Thailand is pretty good and China is the classic thing is that if you are buying the Infrastructure companies within the government policy framework where the government wants that sector to grow and if you own the assets there, you will get a very good return. So, gas utilities, renewable have been the areas where the government is supporting the growth. Q: You spoke about gas and gas utilities but what about oil and gas space, especially with regards to crude? A: We are quite sceptical on buying energy company in India because all of them are government companies and government interference you can never rule out. Even upstream companies never benefitted in a big way when oil prices go up. For the downstream companies, this is the best return they have enjoyed in the last 15 years. Means refining margin is at 10 years high. Downstream oil price mechanism has worked perfectly. However, going forward, if refining margin rolls over, if governments start interfering if oil goes to more than USD 60 per barrel level and they are entering into new capex cycle, so all these are red flagged to us. So, we are quite cautious in energy company, which are all government owned.
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