Some Indian firms have graduated into international asset pricing; Asset monetisation in electricity transmission; Episodes 27,28 of Ei
Some Indian firms have graduated into international asset pricing
Anyone who glances at the S&P 500 and the Nifty levels, over the last five years, will be struck by how they seem to move together. This co-movement undermines the gains from international diversification, which is the central motivation for holding global portfolios.
My column in the Business Standard on Monday, From domestic to global asset pricing, thinks about this problem. I conjecture the emergence of two pools of Indian firms: those that are enjoying international asset pricing (higher correlations into the globe, lower required rate of return) vs. a domestic pond (lower correlations into the globe, higher required rate of return). This has interesting implications for foreign investors, for domestic investors and for Indian firms.
Asset monetisation in electricity transmission
Private developers have a hard time getting infrastructure assets in India going. One useful strategy is to think about selling operating assets to private listed companies, that are funded by equity and debt securities. The source would be the government and its PSUs that would do development, build new assets, get them up to one complete year of tolling, and then sell them off to a private operating company on the strength of the proven one-year cashflow. The sink would be private listed operating companies with large balance sheets, low risk, and large-scale foreign equity and debt.
In October 2022, the Ministry of Power proposed a new `AOMT’ mechanism for `asset monetisation’ in electricity transmission. In the following period, there has been little activity through this new proposed mechanism. Akshay Jaitly, Charmi Mehta, Rishika R, and I look back at this experience with a mix of electricity policy and more general public administration thinking in The difficulties of asset monetisation in the transmission sector, published on The Leap Blog yesterday.
Episodes 27,28 of Everything is everything
Vaccines are a nice puzzle in applying the toolkit of public policy to decipher the role of the state. In Episode 27 (29 December 2023), we engage in first principles reasoning around the positive externality and the public good in ordinary vaccination and in eradication campaigns such as that for smallpox. These help us clarify the role of the individual and the role of the state. We encourage you to bring vaccines more centrally into your OOP personal health-seeking behaviours.
Amit Varma has a dream, to build a web series on the transformation of Indian economic policy from 1977 to 2011, that gave us the remarkable growth episode of 1991-2011. In Episode 28 (5 January 2024), we talk through some of the remarkable scenes and colourful people in that story.