Thank you.
I don't really have prepared remarks, but as a typical investment banker, I do have some bullet points that I've jotted down, and I'm happy to have a more interactive discussion on those.
Just quickly on my background, I spent about 23 years of my life in India initially and then the last 13 years or so in Canada. I have had the benefit of studying both in India and here when I did my MBA. I am a managing director in Canaccord Genuity. We're the largest independent investment bank in Canada, but we also have offices globally.
India is one jurisdiction where we don't yet have an office, but we are the only Canadian investment bank to have actually done Indo-Canadian transactions. We started with Birla Minacs back in 2007, which I think was about a $300 million enterprise value transaction. We also did the Algoma and Essar transaction, which was about $1.8 billion.
The trade on the M and A front has been fairly active, but mostly inbound—that is, Indians buying Canadian assets. On the other side, there hasn't been much activity going from the Canadian side in buying Indian assets. A big part of what I do is advise large Canadian corporations on how to do business in Canada. That has been a key part of my role here at Canaccord Genuity, and, before that, at Genuity Capital Markets. I've been doing this for about 12 years now.
I have a sort of compendium of issues that I've come across over the years. I'm sure that at various points in time this committee has probably heard about these issues, some of which Mr. Bonnett has just outlined on the agriculture side. I'd like to point out that I've actually travelled with Viterra several times to India to help them with their strategy in India, and also to Saudi Arabia.
Some of the key issues that we have come up with on that trip, or with other conglomerates when they want to do business with India, have been around trying to protect their dollars. The Canadian corporations have the willingness. They understand that India is integral to the world economic order going forward and that it's getting more and more significant. They do want to be part of it, but one of their key issues is as follows. Let's say that I have a pocket of capital—$100 million or $200 million—and I have board approval. How do I go about making sure that the money can travel to India and that I can invest in certain assets, but also make sure that I have the proper title to those assets? How do I make sure that I can take that money out if there are any issues—whether that's internally within Canada or political issues in India—whenever the economic climate tells me that I need to exit that investment?
There are issues around the legal framework and the arbitration. We all know that the Indian legal system uses English, which is fantastic—so it's different from the Chinese system—but on the other hand, litigation can take years in India.
In the broader sense, in trying to promote trade with India, I think those are two of the more key topics that come out in all of my discussions, whether it's convincing a board or the management team to make the investment in India.
Also, on licensing requirements, we haven't found a one-stop shopping sort of climate, whether it's for an agricultural company or for somebody like McCain or some other company that wants to go to India only to find out that if you want to open a warehouse, these are the 10 different licences you need and here's how you go about getting them.
On the level of India it has been difficult, but on a state level it has been helpful. But that shouldn't be the case. When Canadians want to do business, we want to be open to all of India, and not just to states like Gujarat—which is more proactive and has set up very good standards for dealing with foreign companies—and maybe a couple of states down south. I think it has to be more pervasive, which is hopefully one of the things this agreement will establish.
The other thing that's always been the issue has been the visa requirements. For any C-suite Canadian executive to travel to India, he needs to give his passport and have that passport back to him—I know these are very basic issues, but I think they are fundamental—within two or three days, because he has to travel. This is a multi-billion dollar corporation he's running, and he has to have that passport back.
So we need to make sure that in Canada, in order to get a visa, we have to streamline the processes, as the Chinese have done. I've travelled to China about five times. To get my visa, I go in the morning and in the afternoon I have my visa in my hand. We need to make sure that the Indian consulate works that way.
It's the same thing on the Canadian side. We have to make sure that the Indian business visas are cleared within a matter of two or three days. Significant business people do not have the ability to leave their passports for a week or ten days at the consulate and not get their visas.
The other key issue that always comes up is the idea of the parallel economy in India and the fact that cash is king. It's always been a big impediment. One thing that came up in one visit was that the company wanted to make a significant investment in India, and they wanted to acquire land. That becomes a big issue unless the land is actually owned by the government. If it's private land, it's almost impossible to pay the full price of that land. Nobody is willing to transact, because all you have to give is a cheque in Indian rupees or in Canadian dollars. On the other side is the stated rate for that and the actual rate that the seller is willing to sell at. There's probably a differential of four to five times between those.
This is just one example. I know that people have several other examples. Walmart is going through that issue in India right now. They have spent $25 million on what they call “discussions” with India over the last two or three years to get Walmart into India. Now they're being questioned on why they would spend $25 million on discussions. They are being questioned on that.
But that is a fact of life when dealing with India. It's tough to address, but that's something on the other side of the equation, not on the Canadian side but on the Indian side, that needs to be at least addressed from the government point of view. Then we can have arguments and counter-arguments on that.
On the Indian side, their biggest complaint, from the Indian large conglomerates, has been, every time I've gone there, “Sachin, we've gone to Canada. You showed us great assets. We've made the transactions. We've bought billions of dollars of assets in India. We'd like to see some of that capital come back, whether it's pension plans or whether it's Canadian corporations.”
That is one of the key themes when I go and see the Tatas or the Birlas or the Essar Group: “Hey, we've got a lot of these assets. Why don't the Canadian companies want to come in and start looking at them? M and A means bilateral trade. It shouldn't be a one-way street.”
They were very concerned with the whole net benefits test. When I was in India a couple of weeks ago, one of the biggest concerns they had was what this net benefits test would mean for an Indian company trying to acquire oil sands, for example, or assets within the oil sands, or a services company.
At that time, I sort of told them, look, this has more to do with NOCs, with state-owned entities, and it would probably be on a case-by-case basis. Every transaction, whether it's done by Indians or down from the U.S. to Canada, has the same level of scrutiny. Hopefully this will only be limited to the state-owned corporations and not private investors. I think that's the spirit of the remarks that were made by Prime Minister Harper on Friday or Thursday.
Another point I have on my list here is that when I went down with the Toronto Stock Exchange a year and a half ago and met with many Indian corporations and the Securities and Exchange Board of India, the key issue that came out of that related to the listing of Indian companies in Canada. There is no ability for an Indian incorporated entity to actually raise capital on the Canadian capital markets. They are just not allowed.
So if there is an Indian company with Indian assets, but it has a Mauritius holding company, that company can list on the Toronto Stock Exchange, but an Indian company with Indian assets domiciled in India has to list on the Indian Stock Exchange before it lists on the Canadian Stock Exchange. This to me, from a capital markets perspective, is the single biggest issue that needs to be addressed. I think we need to have more robust capital markets.
That speaks to a lot of capital raising, because Canada has been great at taking assets all over the world—they could be in very remote locations such as Mongolia, Africa, South America—and people come to Canada for mining companies and for oil and gas companies and list them. The Indians are not able to to do that. Even all the Indian companies were baffled by that part of the legislation in India.