Please send job moves to
[email protected]Sebi pushes
Indian companies
to bonds
India’s large companies will have to
meet at least a quarter of their funding
requirements through bonds as of April
NEXTûYEAR ûACCORDINGûTOûNEWûRULESûlNALISEDû
by the market regulator.
The bond funding requirements will
apply to companies with outstanding long-
term borrowings of Rs1bn (US$13.7m) or
above, a credit rating of AA or above, and
an original maturity period of more than
one year.
The framework is unchanged from a
consultation paper published on July 20 by
the Securities and Exchange Board of India.
It excludes commercial banks, as well as
external commercial borrowings and inter-
corporate borrowings between parent and
subsidiaries.
However, DCM bankers do not expect the
supply of bonds to increase immediately as
CORPORATESûHAVEûANûOPTIONûFORûTHEûlRSTûTWOû
years to comply or justify non-compliance
as part of their disclosure requirements to
stock exchanges.
From the third year, corporates will be
tested over a period of two years to see
if they are meeting the bond borrowing
requirements. If a company does not
COMPLY ûAûlNEûOFûûWOULDûBEûLEVIEDûONû
the shortfall amount.
While debt market participants have
welcomed the development, demand
concerns have to be addressed in the long
term.
“It is one thing that the supply side is
encouraged, but at the same time, from the
investor side, the appetite should also be
there,” said Rajeev Radhakrishnan, head of
lXEDûINCOMEûATû3")û&UNDSû-ANAGEMENT
Moreover, in a rising interest rate
scenario, it is not clear how much risk
banks will be willing to take. “If the banks
subscribe to corporate bonds, they will
have the challenge of mark-to-market
valuation and its associated impacts,” said
Radhakrishnan.
Sebi has also removed the requirement
of a 1% security deposit for public issues
of debt securities and non-convertible
preference shares which is a cost for
issuers.
KRISHNA MERCHANTZerobridge adds
ex-BlackRock
APAC COO
ZEROBRIDGE PARTNERS, a Hong Kong-based
debt advisory and investment management
boutique, has hired Michael Marquardt,
FORMERûCHIEFûOPERATINGûOFlCERûFORû!SIAû
0ACIlCûATû"LACK2OCK ûASû#//
Marquardt joins a team of former
investment bankers at Zerobridge led by
Rahul Kotwal, who co-founded the business
last year after over 15 years at UBS, most
recently as head of leveraged capital
markets for Asia ex-Japan and head of the
SPECIALûSITUATIONSûGROUPûFORû!SIAû0ACIlC
Zerobridge has also recruited Luke Garner,
former head of Asian high-yield debt capital
markets at JP Morgan, and Jason Fung, another
lXEDûINCOMEûCAPITALûMARKETSûSPECIALISTûWHOû
was with VTB Capital and Credit Suisse.
Zerobridge provides debt advisory and
investment management services focusing
on the private credit and distressed debt
markets. It targets mid-market companies
that are underserved by international banks
and operates under the Venture Smart
Financing Group, a Hong Kong-based asset
management and advisory business.
Kotwal’s co-founder at Zerobridge is
Lawrence Chu, who also set up VSFG and
serves as non-executive chairman.
Marquardt left BlackRock in 2017
AFTERûSEVENûYEARSûASû!SIAû0ACIlCû#//ûANDû
17 years with the asset manager and
predecessor Barclays Global Investors.
The move comes as BlackRock and
others are stepping up their investment in
private credit in a bid to capitalise on direct
lending opportunities. BlackRock reached
lNALûCLOSEûONûITSû!SIAû0ACIlCû0RIVATEû#REDITû
Opportunities Fund in April.
STEVE GARTONIndia cuts listing
gap to mixed
reviews
The decision last week by the Securities and
Exchange Board of India to shorten the IPO
listing timetable is good news for investors
BUTûWILLûMAKEûBANKûBACK
OFlCESûWORKûHARDERû
and will cut into the business of lending
bridge funds to investors.
Sebi cut the timeframe between an IPO
and the listing of the shares to three days
from six to help protect investors from
market volatility.
“The compression in post-issue timelines
and the consequent early listing and trading
OFûSHARESûWILLûBENElTûBOTHûISSUERSûASûWELLûASû
investors,” Sebi said.
Sebi did not provide more details or say
when the new rules will be effective.
After China, India has the most active
IPO market in Asia. However, concerns over
the falling rupee and rising oil prices have
undermined investor sentiment. According
to Thomson Reuters data, equity capital
market volumes in India as of September 19
were US$15.5bn versus US$28bn in 2017. IPO
volumes are less than half of the US$11bn
reported last year.
Bankers said Sebi needs to make other
reforms.
“The system will eventually get there
but the post-issue logistics will be a bit
CHALLENGINGûFORûlRSTûFEWû)0/S vûANû%#-û
banker said.
“We are waiting for the details and the
lNEûPRINT vûANOTHERû%#-ûBANKERûSAIDû7HILEû
a shorter timetable helps investors, in many
parts of India physical IPO application forms
AREûSUBMITTEDûANDûBANKSûBACKûOFlCESûTAKEû
two to three days to verify all the details in
the forms, he said. “Sebi cannot reform only
part of the system and let the other operate
as in the past. It should encourage more
electronic submission of applications.”
A shorter listing cycle will also mean that
lNANCEûCOMPANIES ûWHICHûLENDûMONEYûTOû
investors to buy shares, will have to lend for
a shorter period. “Earlier, investors borrowed
cash for 8-10 days and now it will be reduced
TOûlVEûDAYS vûTHEûSECONDû%#-ûBANKERûSAID
“The shorter listing timetable couldn’t
have come at a worse time. With the
slowdown in the IPO market, demand for
such loans was falling and now the loan
period is also reduced. Finance companies
used to earn good money on this business,”
an analyst said.
Sebi previously cut the gap between the
closing of an issue and the listing of the
shares to six days from 12 in 2015.
Separately, the market regulator has also
put a cap on the expenses a mutual fund
can charge investors. The maximum total
expense ratio will be 1.25% for closed-end
equity funds and 2.25% for open-end funds.
The TER for debt funds and exchange-traded
funds is capped at 1%.
Traditionally, the TER for Indian mutual
funds has ranged around 1.8%–2.2%.
S ANURADHAFollow IFR Asia @IFRAsia