IFR: What about appetite for high-yield from India? Vikas Halan, Moody’s: One of the issues for high-yield issuers is the all-in cost ceiling, meaning they have to borrow within the 500bp limit set by RBI. That limits the overall universe to very few issuers in our high ‘Ba’ category, or you have issuers like Indiabulls and Lodha that used structures that are not captured by ECB guidelines. Those kinds of activities are also tied to investments overseas that don’t seem to be happening at the moment, which, in my view, is a little bit puzzling, because if you look at global asset valuations, especially on the commodity side, it’s getting very attractive. We might end up seeing more M&A as we get closer to the end of 2016, which would increase the demand for credit. Nipa Sheth, Trust Group: When investors talk about the high-yield space, I don’t really understand what range they’re looking at. If you look at bond funding relative to bank lending rates, most Triple A companies can borrow at around 100bp lower in the bond market than they can get from the banks. If you look at the universe of rated companies, only 10% would be Double A and above. Bank lending rates for companies rated Double A and below are not as high as levels in the bond market, which prices spreads at much higher levels. So none of those companies actually access the bond market because bank funding lines are anywhere close to 10%, 11%, at the most 12% whereas the bond market probably does not have appetite at Double A minus and below. When foreign investors are asking for higher yields, the expectations are high teens. The only space that has been able to offer that kind of yield is the real estate market because the banking sector doesn’t have capital to give to the real estate sector. Therefore we do see very attractive deals coming from a real estate side that get into the high teens. But anything between 12% and 16%-17% is missing from the Indian market because bank funding lines are available at lower rates. So unless there is an active repo market below Double A, you will never see these companies tapping the Indian bond market. Bank credit will always be a very big part of it – unless the partial guarantee scheme changes things. Anjan Ghosh, ICRA: I agree that 2014 issuance seems to have been an aberration. But since interest rates are coming down, local issuance will become more attractive. But even if the investment cycle revives, the market will continue to be dominated by bank loans for quite some time. I don’t really see bond issuance supporting investment activity. Philippe Ahoua, IFC: A lot of people have been talking about the Fed increasing rates. But what’s interesting is what the Fed does going forward, and what the American economy looks like. There will clearly be a refinancing need. The challenge is going to be whether that refinancing need is going to happen offshore or onshore. And is it going to happen in the form of domestic bond markets or in the form of bank loans? From a development institution, we’d like to see more of it happening in the bond market, rather than more bank financing. That’s been a challenge in this whole region. This region is dominated by bank financing, and we want to see more of that being refinanced in the bond market. But just to confirm what the panellist have said, that is a challenge in India, because like in other countries in Asia, it’s all locked in to bank financing for various reasons. IFR: If you look at the onshore numbers for 2014 and 2015, rupee bond offerings amounted to RS2trn in 2014, around US$30bn equivalent. In 2015, so far, we have issuance of RS2.3trn. And we have RS1.4trn and RS1.3trn of rupee bonds falling due in 2016 and 2017 respectively. If you look at the loan markets, we saw US$50bn equivalent volumes in 2014 against US$30bn 2015 year-to-date. we have rupee loans of US$9bn and US$10bn maturing in the next two years. Given this backdrop and India’s growth prospects, are
