Motoring along

If you set out to prove the decoupling hypothesis, the idea that Asian markets are now sufficiently distinct from the US and Europe to be insulated from the global financial crisis, you could do worse than starting with India. While at one point it looked as though the global recession would more than halve the 8.5% growth rate that India had averaged over the previous five years, the country now looks set to grow by as much 6%–6.5% this year and even faster in 2010, the effects of a severe drought notwithstanding. India’s resilience is largely...

While this year’s growth will be lower than 2008’s 6.7% rise, it is expected to come in above earlier forecasts of as low as 4% as industrial output has increased significantly. “The impact of the recession has been far less severe than expected and the industrial and services sector are performing very well,” said Kevin Grice, an India economist at Capital Economics in London who forecast Asia’s third-largest economy would grow 6.5% this year and 7.5% in 2010. Like other economists, Grice said robust industrial production would offset losses...

The Bombay Sensex has skyrocketed almost 51% this year, making it one of the world’s best performing markets. While the market hit a slight wobble on July 6, declining 5.8%, the day the Indian budget was released, equity deals have poured out of India and every issuer and banker is looking to make hay while the sun shines. According to Thomson Reuters’ data, US$8.8bn in equity issuance has been raised so far this year with most of it printing in the past three months. “A phenomenal amount of capital has been raised through GDRs and QIPs since...

The pension market, while now very small, is expected to grow, while financial asset management is expected to rise from US$83bn to US$520bn by 2012. Despite pending government reforms aimed at the pension market, the scope for foreign pension managers is still limited. But on the asset management side, the potential is vast. According to a new report released by an expert panel appointed by India’s national government, the pension market will grow to about US$84bn by 2025. A small portion of the working population is covered by the statutory...

The past six months or so have seen a lot of CDR activity,” said Ashwani Puri, the Delhi-based leader of advisory services with PricewaterhouseCoopers (PwC). “It’s a mechanism which was used a lot after its introduction in 2003 and 2004, and was then seen quite rarely as the economy expanded. But it’s now becoming very active again.” The big question is how effective the CDR will prove to be at serving the interests of both lenders and borrowers. The idea is simple: in order to keep a company out of default, its creditors band together and...

Since the onset of the global crisis, volumes in foreign currency loans have plummeted significantly from the halcyon days of 2006 and 2007. Indian companies then were at the forefront making transformational acquisitions, which eventually led to big-ticket M&A financings, particularly in the offshore loan markets. But as the tide turned globally and liquidity dried up in international capital markets, one consequence has been a sharp fall in outbound M&A from India. In turn, financings have dried up and loan bankers focusing on this area...

India is on a roll due to its infrastructure development with several key petrochemical, power, road and telecom projects being conceived and delivered rapidly. The country has ambitious plans to spend US$500bn on its infrastructure in the five years to March 2012. There were concerns that funding problems would dent this growth but the projects found strong backing from the state-run banks. “The public sector banks sensed the opportunity and grew much faster and thanks to their adequate capitalisation, they could also offer their balance sheet...

Until July 2009, issuance touched Rs992bn (US$20.3bn) from 334 issues versus 787 rupee debt issues totalling Rs1.61trn in the whole of 2008, according to Prime Database. With the current issuance momentum, bankers are expecting 2009 volumes to overtake easily that of 2008 for a new record. “The reason behind the robust onshore volumes is simple,” said Kaustubh Kulkarni, director (capital markets), Standard Chartered Bank. “Indian issuers were hungry for capital, but they had no choice but to look to deals at home rather than overseas....

The government now has the right people in the right positions,” says Anup Maheshwari, head of equities and corporate strategy at DSP Blackrock. “There’s ownership of infrastructure projects. There’s a commitment to deliver and to attract more foreign investment, so the days of political divergence are, hopefully, in the past.” Project financing is the mechanism the government hopes will facilitate India’s infrastructure growth. Of the US$500bn tabled, the central and state governments will provide US$350bn in a 37.2 % and 32.6% weighting,...

Since AIG was bailed out just over a year ago, counterparty risk has been a burning issue. Without US$180bn in US government support, many of the insurer’s credit derivative counterparties would each have been left with losses that they could ill afford – potentially triggering further collapses. Markets are now trying to prevent a repeat by embracing central counterparties (CCP), which will sit in the middle of previously bilateral over-the-counter derivatives trades, to provide clearing and settlement services, while also guaranteeing that...

In the capital markets, too, Hindalco has been quietly managing its funding requirements without much ado, although market conditions have been no less daunting at every step. In late June it completed an amendment to the US$1bn five-year term loan it had signed in November 2008. The amendment was completed in a market that has been tumultuous for loan markets, particularly for foreign lenders operating in Asia. The troubles and stresses these banks are undergoing in their home markets has put a heavy price on capital and a preference for...