Lenders hope
for capex
recovery in India
)FûAûPANELLISTûATûTHISûWEEKSû)NDIAû,OANû-ARKETû
CONFERENCEûINû-UMBAIûHADûBEENûTRANSPORTEDû
BACKûINûTIMEûTOûTHEûSAMEûEVENTûlVEûYEARSû
AGOûTHEûTHEMESûWOULDûHAVEûSOUNDEDû
VERYûFAMILIARûTHEûNEEDûFORûPOLICYûCLARITYû
FORûGROWTH
SUSTAININGûREFORMSûFROMûTHEû
GOVERNMENTûFORûRESUMEDûCAPITALûEXPENDITUREû
and M&A activity.
4HEûCORPORATEûlNANCEûANDûLOANûMARKETû
PROFESSIONALSûGATHEREDûONû4HURSDAYûATûTHEû
INVITATIONûOFûTHEû!SIAû0ACIlCû,OANû-ARKETû
!SSOCIATIONû!0,-! ûWOULDûSTILLûVERYûMUCHû
WELCOMEûANYûOFûTHEûABOVEûTOûHELPûIMPROVEû
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$ESPITEûTHEûRESOUNDINGûELECTORALûVICTORYû
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NOTûTAKENûOFFûANDûHASûFAILEDûTOûMATCHûTHEû
EXPECTATIONSûOFûMANYûWHOûHADûHOPEDûFORû
AûREVIVALûINûTHEûINVESTMENTûCLIMATEûUNDERû
PRO
BUSINESSûANDûECONOMICûGROWTHûFOCUSSEDû
0RIMEû-INISTERû.ARENDRAû-ODI
!DDINGûTOûTHEûPAINûHASûBEENûTHEûIMPACTûOFû
STRUCTURALûREFORMS
h"IGûDISRUPTIONSûOVERûTHEûLASTûTHREEûTOûFOURû
QUARTERSûSUCHûASûDEMONETISATIONûANDûTHEû
IMPLEMENTATIONûOFûTHEûGOODSûANDûSERVICESû
TAXûHAVEûSEVERELYûIMPACTEDûTHEû'$0ûSERIESvû
SAIDû3IDDHARTHAû3ANYALûCHIEFû)NDIAûECONOMISTû
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)NDIANûECONOMYûDOESNTûSHOWûAûROSYûPICTUREû
CURRENTLYû#APACITYûUTILISATIONûISûFARûBELOWûTHEû
nûLEVELSûWHEREûCAPITALûEXPENDITUREû
STARTSûTOûINCREASEv
$ESPITEûTHEûBOOSTûINûLIQUIDITYûFROMû
DEMONETISATIONûLENDERSûHAVEûREMAINEDû
UNWILLINGûTOûPROVIDEûNEWûCREDITûASûTHEYû
GRAPPLEûWITHûTHEûMOUNTAINûOFûNON
PERFORMINGûLOANSûANDûLOOKûTOûRESOLVEûTHEMû
UNDERûTHEû)NSOLVENCYûANDû"ANKRUPTCYû#ODEû
According to India Ratings & Research, a
UNITûOFû&ITCHûTHEûRISK
AVERSEûBEHAVIOURûOFû
THEûBANKINGûSECTORûESPECIALLYûPUBLIC
SECTORû
UNDERTAKINGSûANDûNON
PERFORMINGûASSETSû
challenges banks faced would increase their
RELUCTANCEûTOûLENDûTOûTHEûFRESHûPROJECTSûOFû
STRESSEDûCORPORATES
4HEûREPORTûESTIMATESûTHATûOVERûTHEûNEXTû
TWO
AND
AûHALFûYEARSûGROWTHûCAPEXûWOULDû
BEûMUTEDûANDûOVERALLûCORPORATEûSECTORû
INVESTMENTûWOULDûGROWûBYû2STRNûnû
COMPOUNDûANNUALûGROWTHûRATE ûPRIMARILYû
INûTHEûFORMûOFûMAINTENANCEûCAPEXû4HEû
BASEûCASEûESTIMATEûISûBASEDûONûMODERATEû
CONSUMPTIONûDEMANDûGLOBALûOVERCAPACITYû
ANDûWORKINGûCAPITALûDISRUPTIONSûDUEûTOû'34
4HEûREPORTûADDSûTHATûûOFûTHEûTOPûû
ASSET
HEAVYûCORPORATESûINû)NDIAûAREûSTRESSEDû
ANDûREGISTEREDûNEGATIVEûûCAPEXû#!'2û
FORûTHEûlNANCIALûYEARSûENDINGû-ARCHûû
ûTOû-ARCHûûû4HEYûBELONGûTOûKEYû
INVESTMENT
LINKEDûSECTORSûSUCHûASûMETALSû
ANDûMININGûINFRASTRUCTUREûANDûPOWERû
ANDûMAYûNOTûEVENûBEûINûAûPOSITIONûTOûINCURû
MAINTENANCEûCAPEXû4HUSûTHEYûAREûLIKELYû
TOûDRAGûDOWNûTHEûINVESTMENTûRECOVERYûFORû
another two to three years.
h4HEû)NSOLVENCYûANDû"ANKRUPTCYû#ODEûISû
THEûBIGGESTûGAME
CHANGERûASûITûHASûFORCEDû
errant borrowers to the negotiating table
with lenders. Asset sales have gained
PACEûANDû)ûAMûOPTIMISTICûONûSYSTEMICû
.0!ûRESOLUTIONvûSAIDû2AHULû3HUKLAûHEADû
OFûCORPORATEûBANKINGûFORû3OUTHû!SIAûATû
#ITIGROUP
6IJAYû$ESHWALûHEADûOFûlNANCIALû
institutions and syndications at ICICI Bank,
SAIDûh4HEûPROBLEMûOFûSTRESSûINûBANKINGûHASû
BEENûACKNOWLEDGEDûANDûIDENTIlCATIONûOFû
CASESûHASûALSOûBEENûCOMPLETEDû/VERûTHEûNEXTû
SIXûTOûûMONTHSûRESOLUTIONûOFû.0,SûWILLû
STARTûHAPPENINGûBECAUSEûTHEûASSETSûAREûGOODû
ANDûTHEûREGULATORYûFRAMEWORKûISûINûPLACEû
setting the stage for consolidation, which will
ULTIMATELYûLEADûTOûlNANCINGûOPPORTUNITIESv
!CCORDINGûTOû3HUKLAûTHEûRETURNûONûCAPITALû
INû)NDIAûISûATûPARûWITHûTHEûCOSTûOFûDEBTûFORûTHEû
lRSTûTIMEûINûSEVENûYEARSûWHILEûASSETûTURNOVERû
ISûATûITSûHIGHESTûSINCEûTHEûGLOBALûlNANCIALû
CRISISû4HISûWILLûSERVEûASûAûTRIGGERûFORûPRIVATEû
SECTORûCAPEXûhASû)NDIAûMOVESûOUTûOFûTHEû
TEMPORALûEFFECTSûOFûDEMONETISATIONûANDû'34v
h4HEûSTEELûSECTORûHASûIMPROVEDû
TREMENDOUSLYûANDûPOINTSûTOûAûSIGNûOFû
OPTIMISMû4HEûMATERIALSûINDUSTRIALSûANDû
ENERGYûSECTORSûAREûSHOWINGûMOMENTUMû
as also the traditionally strong areas of
HEALTHCAREûINFORMATIONûTECHNOLOGYûANDû
DISCRETIONARYûCONSUMERûSECTORûFROMûAû
COMMERCIALûBANKINGûPERSPECTIVEvûSAIDû3HUKLA
0ARTICIPANTSûALSOûEXTOLLEDûTHEûPOSITIVESûOFû
lNANCINGûGROWTHûINûTHEûRENEWABLEûENERGYû
SECTORûWHICHû)NDIANûBANKSûHAVEûDOMINATEDû
(OWEVERûSOMEûHAVEûCONCERNSûAROUNDûTHEû
FACTûTHATûITûSTILLûREPRESENTSûEXPOSUREûTOûTHEû
POWERûSECTORûWHICHûINû)NDIAûISûONEûOFûTHEû
MOSTûCHALLENGINGûFORûDEBTûlNANCIERS
h2ENEWABLEûENERGYûlNANCINGSûHAVEû
BEENûEXPERIMENTEDûINûTHEûLASTûTHREEûTOû
four years through loans, bonds and credit
ENHANCEMENTûSTRUCTURESû)FûTHEûMOMENTUMû
sustains and PPAs honoured, these are good
ASSETSûTOûBEûlNANCEDvûSAIDû$ESHWAL
3HOULDûCAPEXûPICKûUPûINûTHEûCOMINGû
MONTHSûITûWOULDûBEûAûBOONûFORûLOANûVOLUMESû
FROMû)NDIAûWHICHûHAVEûLARGELYûCOMEûFROMû
RElNANCINGû&OREIGNûCURRENCYûLOANSûFORû)NDIANû
BORROWERSûTOTALLEDû53BNûINûTHEûlRSTû
THREEûQUARTERSûOFûûAûûFALLûFROMûTHEû
53BNûTRANSACTEDûINûTHEûSAMEûPERIODû
last year.
PRAKASH CHAKRAVARTI
0EOPLE