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He helps Indian banks raise money in London

August 26, 2016 12:10 IST

In India post the success of masala and green bonds on the LSE, Nikhil Rathi tells Rajesh Bhayani that there are many international investors interested in buying into the India story.

A worker shelters from the rain as he passes the London Stock Exchange in the City of London

IMAGE: The London Stock Exchange. Photograph: Toby Melville/Reuters.

Nikhil Rathi enters San-Qi, a restaurant at the Four Seasons hotel in central Mumbai, with a big, brown umbrella because it has been raining relentlessly. As we sit down at a quiet table, the Londoner wonders aloud how Indian ministers sell India to Westerners as a country with 300 days of sunshine. A valid question for a first-time visitor to the country, though not for him: he flies down every now and then and is familiar with the vagaries of weather in the country -- Rathi proffers an answer to his own question.

This is not the only contradiction in India, I tell Rathi. The other reality in Mumbai is that five-star hotels and slums are situated right next to each other. The college tennis champion is quick with his return: "I like the orderly chaos in India."

Masala bonds are rupee-denominated debt instruments issued to overseas investors.

Rathi is the chief executive officer of London Stock Exchange plc and head of international development of the parent, London Stock Exchange Group. A person of Indian origin, Rathi's parents shifted to London in the 1970s from Sarangpur in Madhya Pradesh. Rathi was born and brought up in the UK.

This trip is about masala bonds and green bonds. Both HDFC's masala bond and Axis Bank's green bond issuances took place on the London Stock Exchange.

"I am here to meet people in the financial sector and corporate leaders after the success of the two issues," says Rathi. Several companies want to raise funds through similar instruments on the LSE, and there are many investors interested in buying into the India story, he adds.

Masala bonds are rupee-denominated debt instruments issued to overseas investors. While international multilateral agencies had been issuing such bonds in the past, the Reserve Bank of India allowed Indian companies to raise such bonds in April 2015.

The best part about this instrument for an Indian corporation is that the foreign exchange risk is borne by the investor and not the company. The beauty, says Rathi, is that "international investors have the appetite to invest in India in an instrument denominated in the Indian currency."

Like me, Rathi is a vegetarian. As we check out the menu, I ask a member of the waiting staff what the name of the restaurant really means. He says it is a Japanese term that represents three energies -- three types of dishes in this case. Starting with Japanese, Indian and Chinese cuisine, San-Qi added a Thai kitchen later.

To start with, Rathi orders a mixed mushroom soup, a helping of som tam -- a green papaya salad -- and fresh watermelon juice. "Indian leaders and policymakers are becoming incredibly dynamic and much more willing to listen to the issues and suggestions raised by international investors," says Rathi. Evidently, his career as a civil servant before joining the LSEG gave him an opportunity to interact and observe Indian politicians closely.

Rathi joined the LSEG in May 2014 as director of international development and chief of staff as well as a member of the LSEG executive committee. He joined the LSEG from the UK treasury, where he held a number of senior roles over 11 years. He was the youngest director there and represented the UK government's financial services interests in the European Union and internationally.

"In 2008-09, as head of the financial stability unit, he oversaw a number of interventions during the financial crisis, most notably the 45.5-billion pound recapitalisation and 300-billion pound asset protection scheme for the Royal Bank of Scotland."

Scooping up a forkful of salad, he says his talks with investors suggest that "they (global investors) expect India to move fast on the path of reforms related to goods and services tax, bankruptcy law, land reforms and, of course, ensure tax certainty." Most of these, except land reforms are, thankfully, on track, he adds.

I ask Rathi if he is ready to order the main course. "I consider Indian hospitality the best in the world," he says. We are left with little less than an hour before he has to step out for his next meeting.

When I observe that India's prime minister seems to be investing a lot of time building relations internationally, Rathi begins talking about his experience with the UK prime minister's office. Rathi has served as private secretary to the UK prime minister for three years between 2005 and 2008 -- the first two of those with Tony Blair and the third year with Gordon Brown. He says the PM's is a 7 am-to-10 pm job and what he says or what he doesn't, where he makes errors or where he doesn't are observed widely and interpreted variously by people. "But out leaders -- be it in the UK or in India -- have been working hard to serve their respective nations, I must say."

The investing community in India has many questions in which Rathi's views matter and I wanted to quickly raise them before time ran out. The main course arrives. He has ordered a green dragon roll with asparagus, cucumber, avocado, tomato and chilli threads. I have asked for a Nizami handi of mixed vegetables in tomato gravy with tandoori roti.

What impact will Brexit have on the Indian investor community? "In practice, Brexit is still some time away as there is a window of more than a year. The new prime minister will certainly find and negotiate the way forward so that the process of separation from the EU is implemented smoothly," say Rathi.

There's a huge chunk of international investors who are attracted to India's sophisticated retail market

I say it is the civil servant in him replying. He doesn't disagree.

"The UK economy was never sufficiently converged with that of the rest of the EU. It retained its currency and the UK monetary authority had macro flexibilities." He sidesteps the question of the possibility of Scotland or other countries exiting the EU. "Strong cultural bonding among citizens within the United Kingdom can play its role when such a time comes," he says.

But India need not worry much -- the LSEG can play an important role in funding Indian fund seekers and global investors, he says and adds, "Technology has made businesses region-agnostic", be it the stock exchange industry or the international finance centre coming up at the GIFT (Gujarat International Finance Tec) City near Gujarat's capital.

His views on the GIFT centre is important as the National Stock Exchange has tied up with the LSE for its stock exchange to come up there while rival Bombay Stock Exchange has Deutsche Boerse as an equity partner in BSE as well as for the stock exchange coming up at GIFT. What will happen when the global entities merge? "Nothing has been finalised yet," says Rathi.

Before his black coffee arrives, I ask why Indian companies no longer seem excited about the alternative investment segment (AIM) of the LSE which, not so long ago, looked quite attractive to small Indian companies.

Is it because they have more options in India now? He says the platform is still quite vibrant. A couple of Indian e-commerce companies have listed on the AIM. Many investors active on the AIM invest in crowd-funding and peer-to-peer lending and there is still scope for small Indian companies to hop aboard.

"There's a huge chunk of international investors, who are attracted to India's sophisticated retail market," he adds.

As we wind up, I ask when he had last visited India with his family. "That was in March during Holi," he says. "We went to Sarangpur and we played Holi together as a family. It was a wonderful experience and possible only in India," he says wistfully.

Rajesh Bhayani
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