Mumbai : India is on a positive note with steady long-term foreign investment inflows, according to PD. Mr Singh, JPMorgan Chase Bank India Corporate Banking Chief Executive Officer and Managing Director, said: In India, regulators have driven change through disruption and innovation, Singh said in an interview. While companies are diversifying and raising capital, there is less concern about returning to past over-leverage scenarios, he added. Edited excerpt:
Mumbai : India is on a positive note with steady long-term foreign investment inflows, according to PD. Mr Singh, JPMorgan Chase Bank India Corporate Banking Chief Executive Officer and Managing Director, said: In India, regulators have driven change through disruption and innovation, Singh said in an interview. While companies are diversifying and raising capital, there is less concern about returning to past over-leverage scenarios, he added. Edited excerpt:
Do you agree that a recent survey conducted by a foreign fund house consisting of sovereign wealth funds and hedge funds showed that Indian debt is more attractive than that of China and other emerging markets?
Given India’s decades of growth potential, this is not surprising. Certainly it is not isolated from global developments as it depends on things like energy, but India is in a bright spot and has long-term investment potential. Flash probably won’t show up in the pan. While the rest of ASEAN has seen significant initial investment, India has seen a steady influx of long-term capital. A similar trend can be seen in the stock market. Importantly, regulators have driven change through disruption and innovation, which to me is one of our key differentiators.
Do you agree that a recent survey conducted by a foreign fund house consisting of sovereign wealth funds and hedge funds showed that Indian debt is more attractive than that of China and other emerging markets?
Given India’s decades of growth potential, this is not surprising. Certainly it is not isolated from global developments as it depends on things like energy, but India is in a bright spot and has long-term investment potential. Flash probably won’t show up in the pan. While the rest of ASEAN has seen significant initial investment, India has seen a steady influx of long-term capital. A similar trend can be seen in the stock market. Importantly, regulators have driven change through disruption and innovation, which to me is one of our key differentiators.
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Do you see Indian companies deleveraging?
absolutely. Value creation is the result of long-term investments in the final cycle. Indian companies generate a lot of cash and raise capital wisely. These cash pools have been used for deleveraging. De-leveraging has improved credit conditions and further reduced interest costs, despite higher benchmark interest rates. Financial flexibility allows companies to seize the next stage of organic or inorganic opportunities. The impact of this on activation activity levels cannot be underestimated.
But if you look to conglomerates, they managed to pay off their debts during the pandemic. But now they are raising more loans again. Is this an early sign of a return to high leverage?
This is an opportunity indicator, and opportunities vary by sector. For example, in the telecommunications sector, we want to be the first to adopt the latest technology and the ability to scale up. This increases efficiency and benefits the entire country. However, given current capacity utilization, it is unlikely that companies will return to a high leverage scenario any time soon, as no significant capacity additions have been made. However, although we do not see large-scale capital investment, there are new entrants and diversification is occurring.
Can you see Indian companies avoiding offshore loans from abroad?
Indian companies know how to manage their debt. They have demonstrated agility to take advantage of available market dynamics. In the current situation, foreign currency base interest rates are rising faster than the Indian Rupee.
Also, forward cover may in some cases be better considered funded in rupees if the objective is to remain fully hedged, especially if there are no underlying exposures such as export flows. It could be cheaper.
Companies with good credit have the ability to raise foreign currency funding at competitive levels and have executed selective transactions.
What are your thoughts on startup funding and the debt they are raising?
We have new economic cells dedicated to sub-segments of this sector. Recognizing that each situation requires a bespoke approach in this area, we incorporate best practices and offer a specialized product line. Funding decisions are made on the basis of specific circumstances.
What about debt refinancing? Are many businesses looking to refinance now?
A few years ago, quite a few companies raised dollar bonds and ECBs (external commercial borrowings). As we approach the minimum average maturity, companies are exploring a range of onshore and offshore options. As credit conditions improve, borrowers are in a better position to negotiate better terms and pricing. Increased flexibility is beneficial to borrowers supporting growth plans.
Can you name some of the broader themes you see?
We continue to work with our clients on outbound challenges. Many companies are expanding their overseas investments to get closer to their customer base and supply chain. These companies have their processes and services centralized in India and their international growth is increasing the opportunities for India to serve as a global hub for manufacturing and services.
The inbound story is also strong, with multinationals looking to tap into India’s vast potential by setting up permanent manufacturing facilities, hubs and offices in multiple cities across the country. JP Morgan is a globally connected company and we benefit from that network.
The third part is regional infrastructure by the private sector and government, and again we work with both sides. Many of these receive support from multilateral institutions, and we are directly or indirectly involved wherever possible to add value.
Do you see Japanese financiers operating in India? They are funding several major infrastructure projects.
They certainly play an important role. The dedicated freight corridor is perhaps one of the largest infrastructure investments in the country, with one of the corridors being fully supported by a freight corridor. That being said, given the scale of investment required, there is enough investment for everyone.
