Sansar Capital Head Motwani Takes Stock of Opportunities in Iraq

Something important happened in Iraq recently, and it wasn’t the tenth anniversary of the U.S.-led invasion. In February, Asiacell Communications, the country’s largest mobile phone company, raised almost $1.3 billion by selling 25 percent of its shares on the Iraq Stock Exchange. The biggest IPO in the Middle East since 2008, it was a turning point for Iraq , says Sanjay Motwani, founder and president of New York– and Singapore-based Sansar Capital Management. Sansar, which has invested some $27 million in Iraq since 2011, was one of the first foreign investment firms to enter the local market. Motwani, 43, spent eight years as investment manager at New York’s Kingdon Capital Management before he launched Sansar in 2005. Senior Writer Aaron Timms spoke to him recently about the changes he’s seen in Iraq, how the nation of 32 million is poised for rapid growth and why it’s still a verdant, little-contested pasture for smaller funds like his.

伊拉克市场如何在三年内发生变化，你在那里旅行和投资？

Two years ago volumes were around $1 million a day at best; today they’re up around $3 million or $4 million. Before you couldn’t get live pricing; today that’s changed. Every time we’ve traveled through Iraq over the past two years, we’ve had confirmation that at the ground level things are doing incredibly well. There’s a major disconnect between what the press is writing about Iraq — the car bombs, the sectarian violence — and what’s really happening on the ground. Probably the biggest disconnect is what’s happening at the micro, earnings level with companies in Iraq. The banking sector is about 40 percent of the stock market today; if you look at the 15 banks that are listed, five of them had cumulative earnings growth between 2010 and 2012 in excess of 400 percent. There’s also very little brokerage coverage in Iraq and very little institutional activity. The explosive growth in these companies is still relatively underreported.

Is there much room to move beyond this initial growth spurt?

The earnings are coming off a low base, but market-cap-to-GDP in Iraq is still 8 or 9 percent. That’s well below other countries in the region. Across the Middle East the ratio is probably closer to 55 percent. So there’s a lot of room to move there. And lots of the companies are hugely undervalued. Take Iraqi Middle East Investment Bank. In many other emerging markets, a lot of the very fast-growing banks trade at 20, 30 times earnings. Here you have a bank that trades at 4 times earnings. There’s huge catch-up potential. People were storing money under their mattresses during the Saddam Hussein era, and now that money is gradually creeping back into the banking sector.

Has it been difficult to gather reliable information on individual companies?

这是一个巨大的挑战。当我们开始,我们哈d a very tough time getting conference calls. There’s no equity culture; this is not America, where executives are getting hundreds of millions of dollars in compensation based on the price of the stock. But things have changed for us. No. 1, we have an Arabic speaker on our team. We’ve found cases where issues have been highlighted in the footnotes to company accounts but those issues have then been omitted from the English translation. No. 2, we’ve been to Iraq a few times. By coming to Baghdad we’ve gained a lot of respect.

When do you expect larger funds to take a more active interest in Iraq?

外国基金的最大障碍是缺乏全球监禁服务。世界的汇丰银行和标准特许人会给一些大型投资者带来很多信心。但是[银行]只会进入曾经有大量的需求，所以它是一种鸡蛋和蛋情景。这为我们这样的人提供了在伊拉克已经具有惊人的机会。一旦大型监禁服务到达，市场将无疑将上升。市场不是很潮流;在没有对股票价格的重大影响方面，不可能分配重要的金额。

How much of a concern is security?

当有炸弹时，我急于打电话告诉我的经纪人卖掉股票。如果有的话，我更倾向于购买。即使在炸弹爆炸是一个非常糟糕的炸弹时，市场通常与[安全情况]相比，与[安全情况]相比。我们在市场上长期以来，我想象着许多在这里的人现在有类似的观点。CNN效应是如此说服力，大多数叫伊拉克公司的外国投资者花费大部分电话谈论车辆炸弹。但如果我在巴格达的高管在同一个房间里坐在同一个房间里，我不花一个小时的说法说“哦，你怎么看待最新的汽车炸弹？”它无关紧要。你谈论了公司的基本面和表现。他们因为那个而尊重了大量的尊重。