GST Will Lead to Mergers, Rise of World Class Cos, Says Mobius
In an exclusive interview with ET Now’s Tanvir Gill, Mark Mobius, executive chairman, Templeton EM, says GST is unlikely to be fully implemented before end of next year. Edited excerpts:
The GST council has proposed a structure of levying cess on ultra-luxury and sin goods, a departure from original GST concept. The sound bites that you are getting as of now, do they convince you that they could perhaps make it at 11th hour 59th minute?
No I do not think that is possible because there are so many different forces at work that you cannot expect a clean immediate implementation of this system.
So what would be a reasonable time line according to you?
I think the end of next year.
So it gets pushed back by eight-nine months?
For complete implementation. In the mean time, there will be incremental changes taking place which will be very beneficial. But to be realistic, we have to take longer term in consideration. I would be happy to be surprised. It will be wonderful if they are able to do it before that, but I think it will be a little longer than we expect.
The reason I ask you this is because you had told me that with GST passage, you would look at doubling your India investments. Even in your last interview, you said that your India allocation stands at 7.5-8%, the EM fund can go up to 14%, even 20% plus. So when would you start increasing your allocation? What would you want to see to make that decision?
A lot of it will depend on what happens to pricing of the securities. When I say that I do not mean just this absolute stock price but also the earnings. If earnings surge, then we can justify doubling, tripling our allocation; and of course, when we talk about GST, we talk about what impact that has on the earnings of the companies. We have to be flexible and look at each company on an individual basis and determine what they are going to be and what impact the GST is going to have on those earnings. In some cases, it will be as much as 10% increase in earnings and that can be very significant.
Yes I want to talk about that because even S&P has put out a note that if GST goes through as per plan, then India’s potential of 8%-plus would very much come to the fore. Do you agree with that?
I agree. Yes. Full implementation. This is very important. – www.economictimes.indiatimes.com [22-10-2016]