Finding the right partners to invest in India

To better understand these trends from a bottom-up perspective, NordSIP reached out to Oliver Campbell, Analyst and Portfolio Manager at Stewart Investors. Stewart Investors’ approach to exploiting the investment opportunity in India focuses on identifying high-quality businesses characterised by reputable and reliable management, with strong cultures, and whose alignment with long-term sustainable development contributes to their profitability.

The case for India

Across all Stewart Investors’ strategies, around US$5.8 billion was invested in India at the end of June 2025, representing 34% of the firm’s total assets under management (AuM). At the end of the first half of 2025, approximately 12% of the Stewart Investors Worldwide Leaders strategy was invested in Indian companies, while the dedicated Stewart Investors Indian Subcontinent All Cap strategy, launched in 2006, now holds US$792 million in client assets. That strategy currently invests in 35 companies, with prominent holdings in the financials, industrials and consumer discretionary sectors, complemented by exposure to healthcare, communication services, IT and materials.

For Campbell, the case for India is well framed by what he calls the “four Ds”. The first one is demographics: India has a young and growing population. Second comes democracy: India has strong institutions, operating under the rule of law and subject to democratic checks and balances. Then demand: India has high unmet needs across society, which offer long-term growth potential across numerous sectors. The last “D” stands for difficult: India also presents a demanding and competitive business environment. Campbell welcomes this challenge: “This tough environment has forged resilient, high-quality companies,” he explains.

Global international trade readjustments also support the case for India, which offers internal growth opportunities that are a potentially useful hedge against other global trends, according to Campbell. “Overseas investment into India is being supported by many companies’ ongoing ‘China Plus One’ diversification strategies. India’s large and growing domestic market, meanwhile, should provide a valuable counterweight if there is a slowdown in global trade,” he says. Reducing the country’s import dependency also represents a medium-term growth driver for its domestic suppliers. “The Tata Group companies and Triveni Turbines are both well-positioned by virtue of having locally sited operations and sales, although we accept that both companies’ export sales could weaken over the near term,” Campbell adds.

Campbell believes that the tendency of mainstream asset managers to compare India with China can be problematic. The experience of Stewart Investors in the Indian market has provided the firm with a different perspective. “When I speak to international investors, they tend to juxtapose India with China, because they share similar characteristics, such as the size of the population, growth rates and demand for infrastructure capital. However, I wonder whether the better comparison is not rather with the USA in the 1940s and 1950s. The times are different and, clearly, the choices available to the USA then are not the same as the ones facing India now. However, the present political economy and demographic trends in India bring it close to the USA of times gone by than to present-day China,” Campbell argues.

Indian institutions and growth potential

Campbell highlights the crucial role of India’s robust institutions as well as the important contributions that Indian companies must play in paving a unique path towards a sustainable future.

“Regardless of who is in power, India still has to hold elections and governments need to win or negotiate majorities with a bicameral legislature, an independent bureaucracy and judiciary which provide checks and balances. This is not something that all countries in the region enjoy. Not all emerging markets provide political and legal recourse and a reliable rule of law, all of which are helpful for foreign investors,” Campbell shares.

The presence of a resilient and well-structured political and judicial system in India mitigates much of the potential volatility or drawdown risk typical of emerging markets. “From our perspective, a dollar earned today is worth nothing if it cannot be earned every year thereafter. One of the factors that investors need to consider is a country’s political economy. There have been instances where authoritarian regimes shut down entire industries or ‘overly successful’ companies overnight. Shares suddenly become worthless, and investors are left without any form of political or legal recourse,” explains Campbell.

India’s strong growth potential also means that limits will be tested, and a pragmatic and sustainable approach is imperative when considering long-term investment opportunities. Growth expectations on the demand side must be met by capacity on the supply side. “If every Indian family is going to own two cars, we’d need 700 million new cars, for example. There simply aren’t enough resources in the world to satisfy this demand. Faced with this reality, we’re trying to find companies that are driving human development in a sustainable way, fully aware that there are significant ecological constraints on the planet,” Campbell says.

Mahindra & Mahindra (M&M) exemplifies companies aligned with Stewart Investors’ criteria thanks to the diversity of its business activities, according to Campbell. “Its core revenue driver lies in producing automotive equipment, including tractors. However, along with making agricultural equipment, utility vehicles and two-wheelers, M&M is also involved in financial services, property, vacations, and logistics. Because increasing the efficiency of farm equipment – and providing financing to farmers – helps to make India’s fragmented agricultural sector more efficient and profitable, we believe it directly contributes to the country’s human and economic development,” he notes.

Corporate governance considerations

Corporate governance in India is a recurrent concern for foreign investors, Campbell acknowledges. However, he believes there is no clear reason to single out India in that respect and that investors’ misgivings are largely misplaced. He also believes that accurately evaluating corporate governance around the globe cannot be done with a one-size-fits-all approach.

“It is also important to take a nuanced view and understand that different rules don’t necessarily equate with worse corporate governance. Many countries that have very good disclosures have completely unresponsive boards and executive teams, while investors can often reach CEOs and chairmen directly in other countries where regulatory requirements are far looser. On-the-ground expertise matters,” Campbell adds.

What appears as a lack of corporate transparency or as unfamiliar governance behaviour presents a valuable chance to identify a potential investment opportunity for a savvy investor in areas that others neglect. “On a personal level, the joy of investing is in the grey areas. They require a bottom-up approach to understand the companies, their processes and people, and what the key points are to the investment case. Typically, the nexus of investments stands on some very simple points, but these can be hard to discern,” Campbell explains.

Governance is the foundation on which all of Stewart Investors’ sustainability work is built, according to Campbell. The firm’s sustainability analysis is not led by formal ESG scores or measurements which can be narrow, reductive and tell only one part of the story; instead, it thinks about sustainability in a broader but also more nuanced way  There are country-level differences to consider but fundamentally, sustainability is a company-level consideration.

Finding the right people and looking them in the eye

India provides good examples to show how a poor sustainability track record represents a red flag for long-term investors, being an indicator of a company’s true priorities. “An asset manager with an investment horizon of only five months is not going to care about the sustainability of a company,” Campbell warns. “However, many long-term risks are sustainability risks. A company that dodges its taxes might not suffer from one specific year to the next. But that should be a red flag that management feels it is acceptable to cut corners. And if they are willing to shortchange one stakeholder, eventually that will happen to other stakeholders, including shareholders.”

Campbell advocates a bottom-up approach focused on the character of the people at the head of potential investee companies. He believes there is no effective substitute for a boots-on-the-ground tactic based on face-to-face meetings with key corporate decision makers. “The fastest way to lose money is to back the wrong people. We cannot rush to some tech or industrial trend and ignore the quality of the people involved. People tend to show you their true colours. You just need to pay attention,” he adds.

For Campbell, there is no substitute for the hard work and local expertise of the company’s emerging markets team. “We have 40 years of proprietary research notes, getting to know people, families, and successions in emerging market businesses that we can rely on to help us understand the culture of a company and the integrity of its people and business partners. While past fund performance is not indicative of future fund performance, people’s past behaviour does tend to be indicative of their future actions. Good people tend to follow other good people,” he says.

CG Power and the Murugappa Group

Campbell has seen the effectiveness of this ‘people power’ in helping to rapidly turn around poorly performing businesses. CG Power, a company manufacturing motors and transmission equipment provides a good example. “The company was once plagued by governance and financial issues that severely damaged its reputation. One of the main factors for our investment in CG Power was the reassurance from the significant investment by the Murugappa Group, which we believe is a reputable partner. They’ve turned around other businesses before and they take the long-term view,” he explains.

Campbell illustrates just how swiftly a company can improve once the management team is properly restructured, as demonstrated by the Murugappa Group’s intervention. “The first thing they did was to clear out and overhaul the management and the board so that the people who had been responsible for the previous problems were gone. They also insisted on restating all the accounts from the problematic years and introducing new processes and internal controls to provide transparency for the business and a true representation of how the business had been running,” Campbell explains. This clean-up associated with the sale of non-core assets, restructuring and debt repayment, as well as operational improvements, restored CG Power’s good performance.

Defence investments remain unappealing

With geopolitical tensions rising globally, many investors have started reevaluating their approach to defence investments. Given India’s position as one of the main regional players in Asia and Stewart Investors’ strong presence in the country, one could expect the firm to pursue opportunities in the sector. However, while fully cognisant of the situation, Campbell points out the firm is sceptical of defence stocks.

While many institutional investors have a clear and pertinent moral argument for steering clear of defence investments, Campbell argues that the business case is also very weak. “Governments, as weapons purchasers, are not great customers. They impose incredibly onerous contractual terms. The negotiations are protracted and heavily bureaucratic. Payments take a long time, and after jumping over all those hurdles, companies are still left with a risky proposition because governments can normally renege on contracts, potentially tearing down the whole transaction, despite all the efforts that would have gone into it.”

Campbell is confident that healthy, sustainable returns can be achieved in India while remaining comfortably distant from the weapons industry: “There are better businesses than the defence industry from our point of view. There are over 50,000 companies out there. You don’t have to invest in those that blow things up. You can choose to help the businesses that make things and help humanity,” he concludes.

India: a trove of opportunities for the seasoned investor

India presents a compelling long-term investment case, underpinned by favourable demographics, robust democratic institutions, and a dynamic domestic market. For Stewart Investors, success in the region hinges on identifying resilient businesses led by trustworthy, forward-thinking leaders who prioritise sustainability and integrity. Rather than chasing short-term trends or mirroring global benchmarks, the firm focuses on deep local understanding and a commitment to human development. In an increasingly complex and competitive world, India offers a unique opportunity for patient capital to thrive by backing the right people, the right businesses, and the right values.