Lenders hope
for capex
recovery in India
)FûAûPANELLISTûATûTHISûWEEKSû)NDIAû,OANû-ARKETû
CONFERENCEûINû-UMBAIûHADûBEENûTRANSPORTEDû
BACKûINûTIMEûTOûTHEûSAMEûEVENTûlVEûYEARSû
AGO ûTHEûTHEMESûWOULDûHAVEûSOUNDEDû
VERYûFAMILIARûTHEûNEEDûFORûPOLICYûCLARITY û
FORûGROWTH
SUSTAININGûREFORMSûFROMûTHEû
GOVERNMENT ûFORûRESUMEDûCAPITALûEXPENDITUREû
and M&A activity.
4HEûCORPORATEûlNANCEûANDûLOANûMARKETû
PROFESSIONALSûGATHEREDûONû4HURSDAYûATûTHEû
INVITATIONûOFûTHEû!SIAû0ACIlCû,OANû-ARKETû
!SSOCIATIONû!0,-! ûWOULDûSTILLûVERYûMUCHû
WELCOMEûANYûOFûTHEûABOVEûTOûHELPûIMPROVEû
LOANûVOLUMES ûEVENûTHOUGHûTHEûPOLITICALû
CLIMATEûISûMUCHûDIFFERENTûTODAYûRELATIVEûTOû
$ESPITEûTHEûRESOUNDINGûELECTORALûVICTORYû
THATûCATAPULTEDûTHEû"HARATIYAû*ANATAû0ARTYû
TOûPOWERûINû-AYû û)NDIASûECONOMYûHASû
NOTûTAKENûOFFûANDûHASûFAILEDûTOûMATCHûTHEû
EXPECTATIONSûOFûMANYûWHOûHADûHOPEDûFORû
AûREVIVALûINûTHEûINVESTMENTûCLIMATEûUNDERû
PRO
BUSINESSûANDûECONOMICûGROWTHûFOCUSSEDû
0RIMEû-INISTERû.ARENDRAû-ODI
!DDINGûTOûTHEûPAINûHASûBEENûTHEûIMPACTûOFû
STRUCTURALûREFORMS
h"IGûDISRUPTIONSûOVERûTHEûLASTûTHREEûTOûFOURû
QUARTERS ûSUCHûASûDEMONETISATIONûANDûTHEû
IMPLEMENTATIONûOFûTHEûGOODSûANDûSERVICESû
TAX ûHAVEûSEVERELYûIMPACTEDûTHEû'$0ûSERIES vû
SAIDû3IDDHARTHAû3ANYAL ûCHIEFû)NDIAûECONOMISTû
ATû"ARCLAYSûh4HEûINVESTMENTûCYCLEûINûTHEû
)NDIANûECONOMYûDOESNTûSHOWûAûROSYûPICTUREû
CURRENTLYû#APACITYûUTILISATIONûISûFARûBELOWûTHEû
nûLEVELS ûWHEREûCAPITALûEXPENDITUREû
STARTSûTOûINCREASEv
$ESPITEûTHEûBOOSTûINûLIQUIDITYûFROMûDEMONETISATION ûLENDERSûHAVEûREMAINEDû
UNWILLINGûTOûPROVIDEûNEWûCREDITûASûTHEYû
GRAPPLEûWITHûTHEûMOUNTAINûOFûNON
PERFORMINGûLOANSûANDûLOOKûTOûRESOLVEûTHEMû
UNDERûTHEû)NSOLVENCYûANDû"ANKRUPTCYû#ODEû
According to India Ratings & Research, a
UNITûOFû&ITCH ûTHEûRISK
AVERSEûBEHAVIOURûOFû
THEûBANKINGûSECTOR ûESPECIALLYûPUBLIC
SECTORû
UNDERTAKINGS ûANDûNON
PERFORMINGûASSETSû
challenges banks faced would increase their
RELUCTANCEûTOûLENDûTOûTHEûFRESHûPROJECTSûOFû
STRESSEDûCORPORATES
4HEûREPORTûESTIMATESûTHAT ûOVERûTHEûNEXTû
TWO
AND
AûHALFûYEARS ûGROWTHûCAPEXûWOULDû
BEûMUTEDûANDûOVERALLûCORPORATEûSECTORû
INVESTMENTûWOULDûGROWûBYû2STRNûnû
COMPOUNDûANNUALûGROWTHûRATE ûPRIMARILYû
INûTHEûFORMûOFûMAINTENANCEûCAPEXû4HEû
BASEûCASEûESTIMATEûISûBASEDûONûMODERATEû
CONSUMPTIONûDEMAND ûGLOBALûOVERCAPACITYû
ANDûWORKINGûCAPITALûDISRUPTIONSûDUEûTOû'34
4HEûREPORTûADDSûTHATûûOFûTHEûTOPûû
ASSET
HEAVYûCORPORATESûINû)NDIAûAREûSTRESSEDû
ANDûREGISTEREDûNEGATIVEûûCAPEXû#!'2û
FORûTHEûlNANCIALûYEARSûENDINGû-ARCHûû
ûTOû-ARCHûûû4HEYûBELONGûTOûKEYû
INVESTMENT
LINKEDûSECTORS ûSUCHûASûMETALSû
ANDûMINING ûINFRASTRUCTURE ûANDûPOWER û
ANDûMAYûNOTûEVENûBEûINûAûPOSITIONûTOûINCURû
MAINTENANCEûCAPEXû4HUS ûTHEYûAREûLIKELYû
TOûDRAGûDOWNûTHEûINVESTMENTûRECOVERYûFORû
another two to three years.
h4HEû)NSOLVENCYûANDû"ANKRUPTCYû#ODEûISû
THEûBIGGESTûGAME
CHANGERûASûITûHASûFORCEDû
errant borrowers to the negotiating table
with lenders. Asset sales have gained
PACEûANDû)ûAMûOPTIMISTICûONûSYSTEMICû
.0!ûRESOLUTION vûSAIDû2AHULû3HUKLA ûHEADû
OFûCORPORATEûBANKINGûFORû3OUTHû!SIAûATû
#ITIGROUP
6IJAYû$ESHWAL ûHEADûOFûlNANCIALû
institutions and syndications at ICICI Bank,
SAIDûh4HEûPROBLEMûOFûSTRESSûINûBANKINGûHASûBEENûACKNOWLEDGEDûANDûIDENTIlCATIONûOFû
CASESûHASûALSOûBEENûCOMPLETEDû/VERûTHEûNEXTû
SIXûTOûûMONTHS ûRESOLUTIONûOFû.0,SûWILLû
STARTûHAPPENINGûBECAUSEûTHEûASSETSûAREûGOODû
ANDûTHEûREGULATORYûFRAMEWORKûISûINûPLACE û
setting the stage for consolidation, which will
ULTIMATELYûLEADûTOûlNANCINGûOPPORTUNITIESv
!CCORDINGûTOû3HUKLA ûTHEûRETURNûONûCAPITALû
INû)NDIAûISûATûPARûWITHûTHEûCOSTûOFûDEBTûFORûTHEû
lRSTûTIMEûINûSEVENûYEARS ûWHILEûASSETûTURNOVERû
ISûATûITSûHIGHESTûSINCEûTHEûGLOBALûlNANCIALû
CRISISû4HISûWILLûSERVEûASûAûTRIGGERûFORûPRIVATEû
SECTORûCAPEX ûhASû)NDIAûMOVESûOUTûOFûTHEû
TEMPORALûEFFECTSûOFûDEMONETISATIONûANDû'34v
h4HEûSTEELûSECTORûHASûIMPROVEDû
TREMENDOUSLYûANDûPOINTSûTOûAûSIGNûOFû
OPTIMISMû4HEûMATERIALS ûINDUSTRIALSûANDû
ENERGYûSECTORSûAREûSHOWINGûMOMENTUM û
as also the traditionally strong areas of
HEALTHCARE ûINFORMATIONûTECHNOLOGYûANDû
DISCRETIONARYûCONSUMERûSECTORûFROMûAû
COMMERCIALûBANKINGûPERSPECTIVE vûSAIDû3HUKLA
0ARTICIPANTSûALSOûEXTOLLEDûTHEûPOSITIVESûOFû
lNANCINGûGROWTHûINûTHEûRENEWABLEûENERGYû
SECTOR ûWHICHû)NDIANûBANKSûHAVEûDOMINATEDû
(OWEVER ûSOMEûHAVEûCONCERNSûAROUNDûTHEû
FACTûTHATûITûSTILLûREPRESENTSûEXPOSUREûTOûTHEû
POWERûSECTOR ûWHICHûINû)NDIAûISûONEûOFûTHEû
MOSTûCHALLENGINGûFORûDEBTûlNANCIERS
h2ENEWABLEûENERGYûlNANCINGSûHAVEû
BEENûEXPERIMENTEDûINûTHEûLASTûTHREEûTOû
four years through loans, bonds and credit
ENHANCEMENTûSTRUCTURESû)FûTHEûMOMENTUMû
sustains and PPAs honoured, these are good
ASSETSûTOûBEûlNANCED vûSAIDû$ESHWAL
3HOULDûCAPEXûPICKûUPûINûTHEûCOMINGû
MONTHS ûITûWOULDûBEûAûBOONûFORûLOANûVOLUMESû
FROMû)NDIA ûWHICHûHAVEûLARGELYûCOMEûFROMû
RElNANCINGû&OREIGNûCURRENCYûLOANSûFORû)NDIANû
BORROWERSûTOTALLEDû53BNûINûTHEûlRSTû
THREEûQUARTERSûOFû ûAûûFALLûFROMûTHEû
53BNûTRANSACTEDûINûTHEûSAMEûPERIODû
last year.
PRAKASH CHAKRAVARTI0EOPLE