IT WAS just before prayer time.
Faheem, an analyst at SIM Global, and his brother stood in awe in front of the Jama Masjid, the 350-year-old World Reflecting Mosque in Delhi.
A commotion caught his eye (there is always a commotion in India). A crowd was gathered before the central pool, washing their hands, arms and faces in preparation for prayer. Completely taken up in the moment, Faheem joined them.
In ultimate absorption, a bit like Charlotte in Sex and the City, he gargled and swallowed a tiny bit of the water that he now noticed was not that clean after all.
His brother, a medical student, took one look at the water and said: "Dude, you're going to die."
That afternoon, he spent most of his time either surfing his BlackBerry to check on his medical aid options while abroad, or convincing himself that everything was going to be OK.
It wasn't. By the next morning he was rushed to a hospital in Srinagar.
While he was recovering, the army shot two people and most shopkeepers went on strike. The enterprising houseboat operator tried his best, in true Indian entrepreneurial spirit, to use that to his advantage to get the travelling party to extend their visit.
They had no choice but to stay for a few days, but retreated to a hotel with plenty of bottled water.
Something as simple as the daily combination of a tap running water that will not give you an upset stomach, a bristly toothbrush and a plump tube of toothpaste is a totally foreign concept to most Indians.
The per capita consumption of toothpaste in India is estimated to be 100g per person per year - a little more than a large tube, and less than half of what is used in China.
The majority of the population uses toothpowder (much cheaper) or natural cleaning methods.
Colgate is the dominant player across the oral care industry in India, a sector with fantastic growth potential in a country with a burgeoning middle class, fuelled by its inclusive and consumption-driven growth model (helped along by favourable income tax policies and the implementation of the National Rural Employment Guarantee Act - known as NREGA).
Private consumption in India contributes to 59% of gross domestic product (GDP), compared to 39% for China. India's GDP growth is forecast to take over the pace of growth in China this year for the first time in 20 years.
The company also has an enviable distribution network - very important in a country with poor infrastructure.
Not biting
So you may wonder why the share is not held in our portfolios. The answer lies in the key ingredient that is missing at the moment: it's not cheap enough, despite all the positives that we can and have mentioned.
Like most fast moving consumer goods (FMCG) shares in India, the rating is capturing the excellent prospects, while competition and rising input costs are likely to start putting pressure on margins by next year. Colgate is trading on a price to earnings (PE) ratio of 34 times, which drops impressively to 24 a year out.
So the search continues for shares offering great value, often found in faraway places and off the beaten track.
One such stock can be found in the communist state of Kerala. South Indian Bank is something in between a state-owned and a new generation private sector bank.
It is classified as an "old private sector" bank. This means it is not state-owned (as are many of the banks in India), and therefore has the ability to retain and attract better management than its state-owned competitors.
On the other hand, its systems are older than the go-go new generation private banks, and it is a regional bank with not much of a national footprint.
Certainly not as exciting as investing in fast-growing toothpaste trends. But it trades at a forward price-to-book value of 1.2 times and a PE of 10 times.
Chipping away at a return on equity rate of 15% and the potential to increase that over time, it is not going to catch the attention of the hot emerging market money flows.
But it ticks the boxes for us.
So, given the choice between buying into the dazzle of toothpaste or the rather dull regional bank, South Indian bank wins.
Considering an investment in India is enticing, given the exceptional growth opportunities. But buying blindly into a good story is not a sustainable way to invest.
Better to be excited about the returns than the story.
PS Faheem is one of SIM Global's analysts and he was actually in India on holiday during the time of the mosque incident. On the average SIM Global business trip there is little time for sightseeing and, thankfully, for wading in public pools.
*Anet Ahern is head of research at SIM Global.
- Fin24.com