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The “Sure Thing” Play on India

Perhaps the biggest challenge emerging markets face is infrastructure. For wealth and commerce to grow, there needs to be a way for goods to be transported and services to be performed.

China, for one, has recognized this necessity. And to support its growing export-based economy, it’s spending hundreds of billions of dollars building roads, beltways, a high speed rail, airports, shipping terminals and the like.

In comparison, the other Asian emerging giant, India, has done little to improve its infrastructure. And that fact screams opportunity – one that I talk about in my book, Where in the World Should I Invest?

In this excerpt from the book, I discuss the excellent opportunities that India’s infrastructure (or its lack thereof) holds for investors. Enjoy!

The Road to Riches

Infrastructure is likely the easiest “sure thing” play for India. Unlike China, which has spent over a trillion dollars on infrastructure projects in the past 20 years, India has spent a lot of time instead.

They have spent time talking about the trillions needed to improve, build, and maintain their infrastructure. High-speed rail – it’s not going to happen. It’s hard enough to maintain the low-speed rail systems here. Airports? They’re a throwback to the 1970s in almost every respect. Roads? It takes a good hour and half to get from the airport in Mumbai to the Taj Mahal Palace at the Gateway of India on Apollo Bunder – a distance of about 20 miles from the airport. It is my favorite Hotel in Mumbai, a world-class experience from the outstanding food and nightclubs to the well-appointed rooms and service. Be sure to stay in the historic wing. This was the same hotel that suffered a terrorist attack in November 2008. I was staying there just months before. The Hotel has since reopened in all of its grandeur, and I would not hesitate to stay there again.

The ride from the airport to the hotel in Mumbai is an event in its own right and should tell you a thing or two about the road situation. As I mentioned, the ride during rush hour will take more than an hour – believe it.

Picture this: We are in a large coach. Next to us is a taxicab. Next to the cab is a cart being pulled by a horse. Next to that is a tuk-tuk. Next to the tuk-tuk is a scooter. Next to the scooter is a private car. Next to the private car is a man on foot pulling a wooden trailer. Next to him is a cow. And running around these various forms of transport are pedestrians trying to get across the street – there are few traffic lights and scofflaws are the rule of the day.

Oh, I forgot to mention, multiply the scene above by a few thousand and then put them all on a street that would qualify as a minor street in a U.S. city and you will get the drift. Yet, with all of this traffic and mayhem, I have yet to witness one accident on the streets. The local cabbies here (and in China and Vietnam and Thailand and I am sure many other places) have a familiar saying: “good brakes, good horn and good luck.”

The traffic situation in India is by far the worst I have witnessed in all of my travels. Yet, the country manages to thrive and prosper. It’s a scene I like to call “controlled chaos.” I can only imagine how much wealthier and more productive India could actually be if it actually did improve its infrastructure!

There is one pure infrastructure play in India. It’s an $11.7 billion company that has more work than it can handle; its order book, or backlog, is currently more than three times its annual sales.

Involved in everything from heavy engineering to energy, the company has seen revenue double in the past five years and quadruple in the past 10. The markets have taken note of this and its shares are amongst the best performers over the past decade. It’s difficult to project where the share price will go in the short term, but over the longer term this is another company that you need to own if you want to bet on India’s infrastructure growth. And if there is one certainty it is this: India will not grow without spending many hundreds of billions of dollars on its infrastructure.

The investment opportunity that this company presents is just one of the invaluable lessons from my travels in India. All of which I discuss at length in my book. To learn more about this “pure infrastructure play,” and how to profit from many other emerging markets opportunities, order your copy of Where in the World Should I Invest? by clicking here.

Ahead of the tape,

Karim Rahemtulla