Let's face it, India has a Formula One race because it has potential for economic growth, marketing appeal and someone over there had a wad of cash to invest in a purpose-built circuit in the Noida region in which to hold an inaugural race. Dust, dogs, bats, mice and more all congealed to make last Sunday's race one for the history books.
It might be a race for the general ledger book too if Morgan Stanley's glowing review of Indian investment can add merit by using the F1 race as a shining example of why investors should run, not walk, to India with hoards of cash. That is if investors weren't skittish over India continued hiccups and rumored corruption as they stub their toe on the sharp edge of capitalism.
According the Morgan Stanley, the conventional notion is that India is struggling with "flawed execution" by the government but it's main stumbling block is over investment in Capital Expenditures. When corporations go capex crazy, the returns get scarce and risky, as the Wall Street Journal points out. This is a truism in most business circles.
The Buddh International Circuit (BIC) owners, Jaypee Sports International, have praised the event and said they are immediately starting to remedy what small niggles they experienced at their first race. One presumes they are calling Orkin for the bat problem and telling locals to keep their dogs on a leash. The circuit was a $400 million dollar investment and it's only a small part of Jaypee City which is the master plan for the region. Did we mention capex?
With highly desired investments in the range of a 15-20% Return On Equity (ROE), you can see those types of returns are a little way away for BIC as they are projecting a break-even in four years. That isn't stopping Morgan Stanley for calling India a good place to invest as capex equalize and ROE's start to become somewhere within the "appealing" range.
Morgan Stanley, according the the Wall Street Journal, really took the opportunity to use the inaugural Indian Grand Prix to offer comments from drivers such as Ferrari's Fernando Alonso and McLaren's Lewis Hamilton and Jenson Button extolling the wonderment of India, the outlandishly awesome race, circuit, bats, dogs, dust, flowing corners, massive investment opportunities and other not-so-important things like stark poverty huddled around BIC.
All the drivers waxed poetic...that is except for one. It just happens that this one driver is the current World Champion and his comments seemed to fly in the face of what Morgan Stanley was attempting to gain excitement about. Red Bull Racing's two-time champion Sebastian Vettel said:
"At the end of your life, it's friendships, emotions and thoughts that you take with you, rather than what's in your bank account. So, even though people don't have a lot here, they are a lot richer in many ways and we can learn from that."
While focusing on the capex, inflation and post credit-crisis in India, Morgan Stanley is positive that government reforms (like new highway contracts and the removal of procedural hurdles for new coal mining), is a sure sign of improvement but leave it to a 24-year-old kid from Germany to school them in the more delicate sensitivities and sensibilities of the real situation on the ground exposing extreme opulence with a backdrop of radical poverty.
Sure, maybe it is time to invest in India but if you ask me, Vettel has a unique view of how wonderful the Indian people are regardless of personal wealth, capex, ROE's, inflation and construction. He knows that sometimes the excitement of something like a race pales in comparison to lives shared and loves gained. Now let's hope that India can rid the corruption (something many nations could learn from ) and start investing in projects that seek an ROE as well as a social responsibility to those it serves.
How can you not love this guy? Keep in mind; he's the ripe, old age of 24!
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