By Shruti Menon Seeboo
As the Fifth India-Africa Entrepreneurship and Investment Summit kicks off today in Nairobi, fostering crucial dialogue and partnerships between two of the world’s most dynamic economic regions, we have a unique opportunity to gain insights from a leading voice in Indian finance.
Shailendra Kumar, the distinguished Chief Investment Officer at Narnolia Financial Services Ltd., brings over two decades of profound experience in fund management and investment advisory. Narnolia, co-founded by Mr. Kumar, is renowned for its consistent performance and innovative investment strategies, making him a pivotal figure in shaping India’s investment landscape. With Indian companies increasingly viewing Africa as a long-term strategic market, moving beyond raw material sourcing to significant investments in digital infrastructure, pharmaceuticals, energy, and automotive sectors, Mr. Kumar’s perspective is invaluable. He’s particularly focused on exploring avenues within capital market infrastructure and emphasises the critical role of local partnerships and continuous policy monitoring for sustainable growth. Excerpts:
- Narnolia is a prominent name in Indian financial services. How do you view the current investment appetite from India towards African markets, and what specific opportunities or sectors is Narnolia particularly keen to explore or facilitate through its participation in this Summit?
Indian companies are increasingly viewing Africa as a long-term strategic market, moving beyond its traditional role as a raw material source. This is reflected in their expanding operations and formation of new strategic partnerships across the continent. Leveraging India’s IT expertise, significant investments are ongoing in digital infrastructure, e-governance solutions, and fintech innovation. Indian pharmaceutical leaders like Cipla, Sun Pharma, and Dr. Reddy’s Laboratories are actively establishing manufacturing units, distribution networks, and healthcare facilities across Africa, extending beyond just medicine exports, often through key partnerships.
In the energy sector, companies such as Tata Power and Sterling and Wilson Renewable Energy are expanding their renewable portfolios, while ONGC Videsh (OVL) continues significant exploration and investment in oil and gas fields, notably in Mozambique, Sudan, and Nigeria. Furthermore, automotive giants like Mahindra & Mahindra and Tata Motors have established assembly plants and extensive distribution networks. These diverse ventures highlight the vast array of investment opportunities available, with Narnolia specifically focused on exploring avenues within capital market infrastructure.
- 2. Given the diverse economic landscapes across Africa, what key due diligence considerations or market entry strategies does Narnolia advise for investors looking to deploy capital effectively and sustainably on the continent?
Navigating Africa’s diverse policy landscape remains a key strategic challenge for any business looking to succeed continent-wide. We consider identifying a local partner as important to deploy capital effectively, not just for market access but crucially for interpreting nuanced regulations, anticipating policy shifts, and building essential relationships within government and regulatory bodies.
Understanding local customs, business etiquette, and communication styles is required. Also, an extensive due diligence on the local partner’s reputation, financial standing, capabilities, and ethical practices is paramount. Furthermore, companies must invest in continuous monitoring of legislative developments and actively engage with regional economic blocs and industry associations, leveraging these platforms for insights. For true continent-wide success, a phased market entry approach is suggested to allow businesses to adapt to diverse policy environments and gradually build their presence.
- 3. Beyond traditional equity and debt, are there innovative financial instruments or alternative investment structures that Narnolia believes could unlock greater capital flows and entrepreneurial growth in the India-Africa corridor?
The Indian government must further strengthen its Lines of Credit to African nations, directly facilitating Indian-led projects in vital sectors like power, agriculture, water, and infrastructure, which form the bedrock of long-term investments. Crucially, robust mechanisms must be developed to mitigate significant foreign exchange (FX) risk, advocating for local currency debt financing where feasible or structuring revenues to naturally hedge FX exposure.
For listed equity investors, African capital market infrastructure demands significant enhancement. The continent’s current market capitalization of approximately $1.7 trillion, against a GDP of nearly $3 trillion, underscores a key challenge: many exchanges suffer from low trading volumes and limited listed companies. Therefore, strengthening initiatives like pan-African payment and settlement systems is paramount to enable seamless cross-border transactions and truly unlock the continent’s vast potential for global investors.
4. What role do you see Narnolia playing in bridging the knowledge gap or mitigating perceived risks for investors who are new to African markets, and how does your firm leverage its expertise to build confidence for cross-border ventures?
For Indian investors, the success of future ventures in Africa is intrinsically linked to platforms such as the India-Africa Entrepreneurship and Investment Summit, which significantly reduce perceived risk through enhanced people-to-people dialogue. Given India’s current robust growth trajectory and the increasing scale of its institutions and businesses, Africa represents a compelling and logical next avenue for expansion.
This strategic alignment is fortified by a rich history of close cooperation between Indian and African entities, a factor poised to drive higher investment flows. Concurrently, it is imperative for African institutions and businesses to cultivate stronger relationships with the Indian business ecosystem. By diversifying their own portfolios into India, perhaps by engaging directly with Indian asset managers, African stakeholders gain direct access to Indian businesses and investors.
This reciprocal exchange will, in turn, foster a deeper understanding of African opportunities among Indian investors, encouraging greater diversification of their capital into the continent. Narnolia, leveraging its deep roots in the Indian investment ecosystem, is actively building this critical bridge.
