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Opto Sessions

Kevin Carter explains why Indian ecommerce is poised for a boom

Kevin T. Carter returns to Opto Sessions to explore the opportunities he sees in the Indian subcontinent’s fintech sector. With top technological universities, a well-established IT sector and an entrepreneurial culture, Carter believes the country and region are set for prolific growth over the next two decades.


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Kevin T. Carter, founder and chief investment officer of EMQQ Global, returned to OptoSessions this week to discuss his insights into investment opportunities in South Asia. While the focus was primarily on Indiaincluding the India Internet & E-Commerce ETF [INQQ] he also shared his views on some exciting trends and start-ups from Bangladesh and Pakistan.

Carter spoke in detail on the demographic and technological trends that make the subcontinent, and particularly India, a dynamic place for fintech innovation and adoption. As well as this, he unpacked INQQ’s portfolio, and gave an overview of some of its most noteworthy holdings. 

Demographic shift

For Carter, the investment case for South Asia is fundamentally one of demographics.

“In India and South Asia”, he told Opto Sessions, “you have three of the 10 largest countries on the planet. You have India with 1.4 billion people. To the west you have Pakistan, with well over 200 million people. And to the east of India, you have Bangladesh, with another 170 million people.

“All three of those regions combined have 1.8 billion people and more than 800 million people under the age of 30.”

This age dynamic is a key element of the investment case. 27% of India’s population is Gen Z, and while modern financial technology may have been slow to penetrate their parents’ generations, it is now spreading like wildfire throughout the subcontinent.

“I'm a fintech entrepreneur in San Francisco,” says Carter. “If we went back in time, you'd think I would be the person that's the most like George Jetson  you know, zapping my phone to pay for things. It's not me. I use my phone probably three or four times as much to make payments in South Asia as I do in my day-to-day life here in the US.

“I don't know of any sector on the planet that's growing their revenue as fast as the emerging market internet companies,” he added.

I don't know of any sector on the planet that's growing their revenue as fast as the emerging market internet companies.”

What makes India a fintech hub? 

Besides being young, South Asia’s population is also upwardly mobile.

“While we've had consumption in the United States and in the developed world for several generations now,” said Carter, “most of the world doesn't have those things.” That is changing rapidly, though, particularly in South Asia.

“Their incomes are rising,” says Carter. “Those billions of new consumers are also getting to other things that we have taken for granted.

“They’re getting their first computer, and it's not a desktop — it's a $100 Android-based smartphone that’s getting better and more affordable every year... As these billions of people get that smartphone and go online for the first time, because they don't have bank accounts, or Target stores, they’re leapfrogging traditional consumption [patterns] and their consumption will be even more digital than ours.”

Besides the demand, India has all the right ingredients to supply a thriving fintech scene.

“India had a technology sector for a long time before the internet came along,” said Carter. While this, for many years, consisted mainly of IT outsourcing, it has laid the groundwork for another element that makes India a promising fintech hub — its education system.

“India has a very well-educated population,” said Carter. “Their IITs [Indian Institutes of Technology, a group of prestigious, publicly owned technology universities] are world class. They’ve got the engineers.”

Thrown into the mix with these institutions is a well-developed entrepreneurial culture. All in all, the mix creates its own momentum.

“The successful companies create wealth for the early employees. The founders get rich, the employees get rich, they become angel investors, they start their own company, and that can't be put back in the bottle.”

“India had a technology sector for a long time before the internet came along.”

The India Internet & Ecommerce ETF 

INQQ, the India Internet & E-Commerce ETF, seeks to leverage these tailwinds. It offers pure-play exposure to companies deriving at least 50% of their revenue from the Indian market.

Some of Carter’s favourite holdings include Reliance Industries [RELIANCE.NS], which built the country’s first 4G network. After offering customers an unlimited three-month trial, the network attracted 424.5 million users as of December last year, and aims to reach 500 million in 2023.

“Now they're working on a global nationwide 5G network, and they've targeted completion by the end of this year,” said Carter. As of 27 April, INQQ has a 7.95% weighting in Reliance Industries, making it the fund’s top holding (the fund caps all holdings at an 8% weighting).

Another company that Carter picked out was Nykaa [NYKAA.NS], a beauty and fashion ecommerce company.

Nykaa is a fascinating company”. Its founder and CEO, Falguni Nayar, was determined to be an entrepreneur before she turned 50. “She got pretty close and said, ‘alright, now or never’and now she is the second self-made woman billionaire in India.”

Spend on beauty in India is currently low compared to most emerging markets, but Carter believes it is a growth sector based on similar trends observed in China.

INQQ has a 4.27% weighting in FSN E-commerce Ventures Ltd., Nykaa’s parent company.

Carter is clear that INQQ’s thesis is the long-term growth story that he predicts for India, and that, as such, investors should adopt a long-term approach to investing in the fund. “At least a five-year timeframe”, he suggests, “but it's the 10- and 20-year timeframe that is where people can really achieve a very meaningful return”. He added that investing on this timescale allows “the miracle of compounding” to do much of the work.

INQQ is up 5.3% in the past month and down 3.9% year-to-date.

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Listen to the full interview and explore our past episodes on Opto Sessions. You can also check out all our episodes via our YouTube Channel.

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