Opportunities In: Indian Capital Markets

Publication Date	December 2006
Publisher	IFR Market Intelligence
Product Type	Report
Pages	298
ISBN Number	not applicable
Product Code	IFR00006

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Summary

India seeks investments, is keen to play on the world stage and wants to be reckoned as a global economic power. Backed by a progress-hungry billion populace wanting their infrastructure brought into the 21st Century, India is seen as offering rich pickings for foreign investors.

Many banks are already lending heavily to Indian companies, but are they getting too excited about India's economic prospects or is their enthusiasm merited?

Important questions need to be answered before the huge optimism can be realised, and soon. Opportunities in: Indian Capital Markets, from IFR Market Intelligence tackles the key questions you need answered head-on, including:

What is the outlook for India's political reforms and economy?
What's the status and prospects of India's financial markets?
Are India's credit ratings due for an upgrade?
How big is India's banking sector and is consolidation around the corner?

For the first time you can read a truly definitive analysis on every aspect of the financial markets in this fast-emerging market, from the current status and workings to the challenges and future prospects.

This report also provides a wealth of high level interviews, data and analysis:

Top interviews - the most senior government and financial sector executives spoke to IFR, giving you the most reliable and authoritative insights
Company profiles - investigate the strengths, performance and future strategies of the key players in Indian banking
Sectors set for growth - pinpoints India's business sectors with the biggest potential

Content

Executive Summary
India: The New Economic Powerhouse Of The World Economy
Section
Indias Economic Policy
Chapter
The Indian Political System
- Overview
  - Political Division
- Complications Of Coalition Government
  - Threats To Survival
- Viewpoint: P. Chidambaram, Finance Minister
  - Coalition Politics
- Foreign Direct Investment
  - National Common Minimum Programme
  - Political Consensus Key To Reforms
  - Important Position Of The Left
- Viewpoint: Sitaram Yechuri,
  - Cpi(M)
  - Cpi(M) Demands
  - Growth Not Dispersed
  - Economic Reforms Have Failed
  - Opposition To The Frbm Act
  - On Privatisation
  - On Foreign Investments
  - On Rupee Convertibility
  - On Fiis
  - An Uneasy Partnership
- The Bjp Experience
- Viewpoint: Yashwant Sinha,
  - Bjp
  - Political Foresight
  - Tapering Momentum
  - On The Congress-Led Coalition Government
  - On Fiscal Matters
- Outlook - Snap Polls?
Chapter
The Indian Economy
- Overview
  - Strong Growth Momentum
  - Corporate Strength
- Viewpoint: Mahesh Vyas, Managing Director And Ceo, Center For Monitoring Indian Economy
  - New Growth Forecasts
- Viewpoint: Subir Gokarn, Executive Director And Chief Economist, Crisil
  - Market Confidence
- Viewpoint: V Ananth Nageswaran, Chief Economist, Julius Baer
- Future Challenges
- Weakness In The Agricultural Sector
  - Investment In Infrastructure
- Reforms Needed
  - Legal Reform
  - Business Reform
  - Barriers To Reform
- Fiscal Legislation
- The Threat Of Terrorism
- Social Disruption
- The Future Planned
- Five-Year Schedules
  - The 11th Plan
- India And China - Comparisons
- Viewpoint: Chetan Ahya, Economist, Morgan Stanley
  - Economic Prospects
Chapter
Monetary Policy
- Overview
  - Balancing Growth And Ensuring Price Stability
  - Monetary Policy Objectives
  - Highlights Of October 2006 Monetary Policy Announcement
  - Main Points
- Developmental And Regulatory Policies
  - Financial Markets
- Credit Delivery
  - Prudential Measures
- Institutional Developments
  - Inflation Drivers
- Economy Drivers
  - Bank Credit Growth
  - Consumer Debt Risk
  - Money Supply
- Pressure Signs
  - The Rbi On Market-Related Issues
- Challenges Facing The Indian Banking Sector
  - Banking Consolidation
- Credit Quality Concerns
- Development Capital Issues
- Foreign Investments In Debt
  - Outlook
- Tightening Cycle Possible
Chapter
Currency Convertibility
- Progress Towards Fcac
  - Restrictions And Controls
- Risks And Benefits Of Liberalisation
- The Case For Fcac
- Progress In The Opening Up Of The Economy
- Viewpoint: Sanjeev Sanyal, Economist, Deutsche Bank
  - Timing And Sequencing Of Measures
  - New Tarapore Committee Report
  - Monetary Policy Objectives
- Strengthening The Banking System
  - Monetary Policy Instruments And Operations
  - Exchange Rate Management
- Development Of Financial Markets
  - Money Market
  - Government Securities Market
  - Corporate Bond And Securitised Debt Market
  - Foreign Exchange Market
  - Gold Market
- Relaxations On Capital Account
- Regulatory And Supervisory Issues In Banking
- Other Viewpoints
  - Capital Account Convertibility
  - Rbi Follows Up With Another Committee
  - The Last Word On Convertibility
Section
Indias Capital Markets
Chapter
Syndicated Loans
- Overview
  - Significant Rise In Volumes
- Viewpoint: Farhan Faruqui, Managing Director, Head Of Global Loans And Leveraged Finance Asia Pacific, Citigroup
  - Ecb Policy
- Cost-Effective Option
  - New Guidelines
  - Impact Of Changes
  - Regulators Reverse Decision
- Updated Ecb Guidelines (As Of October 2006)
  - Guidelines For External Commercial Borrowing
  - Automatic Route
  - Approval Route
- Reporting Arrangements And Dissemination Of Information
  - Improving Loans Outlook
- Viewpoint: Birendra Baid, Managing Director, Financial Institutions/Syndication & Asset Sales, Rzb Austria, Singapore Branch
- Enthusiasm For Borrowing
  - Ratings Boost
  - Increase In Loans To Corporates
  - Further Deals
- Funding Overseas Acquisitions
- Viewpoint: Richard Palmer, Head Of Asia-Pacific Loan Origination And Structuring, Barclays Capital
- Loan Volumes Rising
- Loan Pricing Falling
  - Viewpoint: Boey Yin Chong, Dbs Bank
- Viewpoint: Jose Cortes, Head Of High Yield Syndications, Asia Pacific, Lehman Brothers, Hong Kong
- Opportunities In Leveraged Financings
- Viewpoint: Amit Khattar, Director, Fixed Income, Emerging Markets Loan Syndication Group, Credit Suisse, Singapore
- Restrictions On Lbos
- Limited Successes
  - Software Development
- Systems Lbo
- Outlook: Rupee Loans
- Record Levels
  - Foreign Bank Participation
Chapter
Corporate Bonds
- The Role Of Gsecs
- Need To Develop The Bond Market
- Obstacles To Investment
- Limited Funding Options
- Moves To Reform The Bond Market
- Viewpoint: Sanjay Phadke, Vice President (Debt Capital Markets), Jpmorgan
- Bond Market Evolution
  - Types Of Issue
  - Pension Bonds
  - Municipal Bonds
  - Infrastructure Project Financing
- Regulatory Measures
- Viewpoint: Indraneel Basu, Principal, Debt Capital Markets, Infrastructure Development Finance Corp (Idfc)
- Market Innovation
  - Swaps
  - Rbi Intervention
- Viewpoint: Kaustubh Kulkarni, Head Of Dcm (India And South Asia), Standard Chartered Bank
- Quasi-Sovereign Bonds
- Compensation Funding
- Offshore Issuers
- Indian Issuers In The Offshore Market
- Viewpoint: N. Shankar, Executive Director, Exim Bank Of India
- Initial Success
- Market Selectivity
  - Return To Favour
- Further Bond Issuance
  - Subordinated Debt Issuance
- Hybrid Issues
  - Cost And Currency Limitations
- Prospects For Offshore Bonds
- Viewpoint: Rajeev Ahuja, Head Of Fixed Income Capital Markets, Citigroup, India
- The Derivatives Market
  - Legislative Reform
  - Derivatives Trading
- Moves To Develop The Bond Market
- Viewpoint: Dr R.H. Patil, Chairman, Clearing Corp Of India
- Implementing The Reforms
- Outlook For Bonds - Firm Action Needed
Chapter
The Securitisation Market
- Potential For Securitisation
  - Organising The Market
- Development Of Securitisation
  - Gradual Acceptance
- Viewpoint: Nithya Easwaran, Director (Securitisation),
- Citigroup India
- Abs Domination Of Issuance Volumes
  - Product Innovation
  - Successful Transactions
  - Direct Assignment Deals
- Mbs Issuance Is Less Popular
  - Investor Support
- Viewpoint: Rv Verma, Executive Director, Nhb
- Viewpoint: Vs Rangan, General Manager At Hdfc
- Cdo Market Remains Underdeveloped
  - Challenges To Overcome
  - Shedding Loan Exposure To Group
  - Npa Securitisation Market To Grow
- Prashant Purker, General Manager, Icici Bank
- Offshore Securitisation
- Viewpoint: William Ross, Managing Director, Head Of Abs & Structured Bonds, Asia Pacific, Hsbc
- Viewpoint: Raj Shourie, Managing Director, Head Of Securitised Products Group Asia, Deutsche Bank
- Recommendations To Develop The Securitisation Market
  - Rbi Guidelines
  - Market Response
  - New Deals
- Viewpoint: Graham Metcalf, Head Of Asia Pacific At Monoline Insurer Mbia
- Future Potential
Chapter
The Equity Market
- Unprecedented Growth
  - Market Structure
- Exchange Development
  - Strong Economic Drivers
- Viewpoint: Bharat Shah, President, Ventura Securities
- The Primary Market
  - Scams In The Indian Equity Markets
  - Reviving The Primary Market
- Important Recent Ipos
  - Sector Confidence
  - Auction Innovation
  - Shares In Demand
- Further Sales
- Viewpoint: A. Rajagopal, Fund Manager, Ubs
- Offshore Fundraising
  - Global Interest
  - Recent Successes
- Sebi Rules On Institutional Investors
- The Cb Market
  - Drivers Of Cb Issuance
  - Unrealistic Offers
  - Aggressive Competition
  - Cb Issuance Revival
  - Investment Risks
  - Growing Investor Caution
  - Market Retrenchment
  - Banking Consolidation
  - Unrealistic Pricing Expectations
  - Market Realism Takes Over
  - Statistics On The Evolution Of Indian Equity Markets
- Future Challenges
- Viewpoint: Paritosh Sharma, Resident Advisor, Usaid Fire Project- Capital Markets
Chapter
Indias Credit Rating
- Gradual Moves Towards Investment Grade
  - The Importance Of International Ratings
- Moodys Upgrades First
- Adequate Capacity
- Fitch Follows The Trend
- Positive Structural Reforms
  - S&P Is Cautious But Positive
- Encouraging Prospects
- Viewpoint: Ping Chew, Director (Sovereign And Financial Services Rating) S&P
- Gaining A Better Understanding Of India
  - The Local Rating Market
  - Crisil - S&Ps India Link
  - Viewpoint: Roopa Kudva, Chief Rating Officer, Crisil
  - Viewpoint: S&P Spokesman Icra - Moodys Partner
  - Viewpoint: Chetan Modi, Representative Director, Moody's India
  - Fitch India - Fitchs Direct Interest
  - Viewpoint: Amit Tandon, Managing Director, Fitch India
  - Care - Wholly Indian
  - Viewpoint: Amol Patil, Deputy Manager, Care
- Competition Between Rating Agencies
  - Different Rating Approaches
- Outlook - Investment Grade Rating For India?
Section
Profiles
Chapter
Bank Profiles
- Introduction - The Indian Banking Sector
  - The Financial Sector
  - Public Sector Banks
  - Private Sector Banks
  - Foreign Banks
  - Development Institutions
State Bank Of India
- Financial Results
- Punjab National Bank
  - Financial Results
- Canara Bank
- Icici Bank
O
Viewpoint: Kalpana Morparia, Joint Managing Director, Icici Bank
Financial Results

Hdfc Bank

Financial Results

Uti Bank

Financial Results

Citigroup, India

Viewpoint: Sanjay Nayar, Ceo, Citigroup, India
Financial Results

Standard Chartered Bank, India

Viewpoint: Sanjeev Agrawal, Chief Financial Officer, India & South Asia, Scb
Financial Results

Hsbc India

Viewpoint: Malini Thadani, Senior Vice-President And Head, Public Affairs, Hsbc India

Nabard

Sidbi

Irfc

Power Finance Corp

Kotak Mahindra Bank

Deutsche Bank

Abn Amro

Chapter

Corporate Profiles

Indian Corporate Sector
Gurus Of Indian Corporate World
Tata Group Of Companies
- Strategy Of Going Global
- Recent Market Tap
Reliance Industries
- Financial Results
Reliance Anil Dhirubhai
- Ambani Group: Recent Market Tap
- Aditya Birla Group
Recent Market Tap
- Indian Oil Corp
New Age Companies
- Infosys
- Wipro
Key Indian Sectors
Automobile Sector:
- Maruti Udyog
- Bajaj Auto
- Mahindra & Mahindra
Telecommunications
- Mtnl
- Bsnl
- Bharti Airtel

Appendix I

The Main Recommendation Of The 2006 Tarapore Committee Report

Appendix Ii

Extant Status On The Capitl Account

Appendix Iii

Regional Variation In Stamp Duty

List Of Tables And Figures

Table 1.1 Disinvestment, 1991-2005 (Rs Crore)
Table 2.1 Gdp, Q1 (April-June)
2004-05, 2005-06, 2006-07 (Rs Crore)
Table 2.2 India Foreign Trade, 1970-2006(P) (Us$M)
Table 2.3 Index Of Industrial Production Table Missing
Table 2.4 Growth And Investment Rates, 1950-2006 (%)
Table 2.5 Gdp Forecasts, 2006-07 (%)
Table 2.6 Socio-Economic Indicators
Table 2.7 Doing Business - India Versus Select Countries, 2006
Table 2.8 Central Government Fiscal Indicators, 1970-2007(E) (%)
Table 2.9 India Balance Of Payments, 1990-2006 (Us$M)
Table 2.10 Components Of External Debt, Mar-June 2006 (Us$M, %)
Table 2.11 Indicators Of Debt Sustainability, Mar-June 2006 (%)
Table 2.13 11th Plan Growth Projections (%)
Table 2.14 11th Plan Projections, Alternative Scenarios (%)
Table 2.15 Foreign Investment Inflows, 1990-2006(P) (Rs Crore, Us$M)
Table 3.1 Chronology Of The Rbi Revisions Cash Reserve Ratio, 1989-2004 (%, Bp)
Table 3.2 Changes In Repo And Reverse Repo, 2000-06 (Bp, %)
Table 3.3 Structure Of Interest Rates, 1970-2006 (%)
Table 3.4 Wpi Annual Variation, 1990-91 To 2006-07(P) (%)
Table 3.5 Cpi Annual Variation, 1990-91 To 2006-07(P) (%)
Table 3.6 Bank Credit, Scheduled Commercial Banks, 1950-2006 (Rs Crore)
Table 3.7 Monetary Indicators, 2005, 2006 (Rs Crore, %)
Table 4.1 Select Macroeconomic Indicators, 1996-97 Vs 2005-2006 (%, Us$)
Table 4.2 Sector Limits On Foreign Investments Into India, As On 26 February 2006 (%)
Table 4.4 Recommendations Of The 1997 Tarapore Report
Table 4.5 Position Of Foreign Exchange Reserves, Q1 2006 Vs Q1 2005 (Us$Bn)
Table 4.6 Foreign Exchange Reserves, 1950-2006 (Rs Crore, Us$M)
Table 5.1 Foreign Currency Loan Volumes, 1983-2006 (Us$M)
Table 5.2 Indian Issuers - League Tables, 1995-2006 (Us$M)
Table 5.3 Foreign Issuers - League Tables, 1983-2006 (Us$M)
Table 6.1 Market Borrowings Of Central And State Governments, 1980-2006 (Rs Crore)
Table 6.2 Financing Of Central Government Gross Fiscal Deficit, 1990-2007(E) (Rs Crore)
Table 6.3 Private Placement Debt Volumes, 1995-Sept 2006 (Rs.M)
Table 6.4 Breakdown Of Issuance, April-June 2006 (Rs Crore)
Table 6.5 Stamp Duty Structure
Table 6.6 Public Sector Issuance Of Bonds, 1985-2006(P) (Rs Crore)
Table 6.7 Overseas Bond Issues, 1990-2006 (Us$M, Rs.M)
Table 6.8 Indian Offshore Bonds - Top Bookrunners, 1991-2006
Table 7.1 Stamp Duty Structure, By State
Table 7.2 Indian Securitisations - Top Bookrunners, 1991-2006
Table 8.1 Bse/Nse Levels, 2004-05, 2005-06
Table 8.3 Household Sector Financial Saving, 2003(P)-06(E) (Rs Crore)
Table 8.3 Mobilisation Of Resources By Sector, 2004-05, 2005-06 (Rs Crore, %)
Table 8.4 Market Capitalisation Of Bse, 2003-Mar 2006 (Rs Crore)
Table 8.5 Market Capitalisation Of Nse, 2003-Mar 2006 (Rs Crore)
Table 8.6 Turnover Of Bse/Nse - Cash Segment, 2003-Mar 2006 (Rs Crore)
Table 8.7 P/E Ratio, Return, Volatility Of Select International Indices, 2005, 2006
Table 8.8 Select Ratios Relating To Capital Market, 2002-06 (%)
Table 8.9 Corporate Sector Performance, 2003-07(P) (%)
Table 8.10 Trends In Mutual Fund Transactions, 2000-06 (Rs Crore)
Table 8.11 Fii Investment Flows, Nov 2006 (Rs Crore, Us$M)
Table 8.13 Global Common Stock League Table 1991 - 2006
Table 8.14 Global Rights And Rights Offerings League Table 1991 - 2006
Table 8.15 Global Intial Public Offerings League Table 1991 - 2006
Table 9.1 India Foreign Currency Sovereign Ratings, 1990-2006
Table 9.2 Government Of India Accounts, End-Sept 2006 (Rs Crore, %)
Table 9.3 Combined Deficits Of Central And State Governments, 1980-2007(E) (%)
Table 9.4 Crisil - 10 Years Highlights, Mar 1997-Dec 2005 (Rs Lakh)
Table 10.1 Sbi - Key Financial Indicators, 2002-06 (%)
Table 10.2 Sbi - Financial Highlights, 2002-06 (Rs Bn)
Table 10.3 Sbi - Half-Year Results To 30 Sept 2006 (Rs Crore)
Table 10.4 Pnb - Half-Year Results To 30 Sept 2006 (Rs Crore)
Table 10.5 Canara Bank - Halfyear Results To 30 Sept 2006 (Rs Crore)
Table 10.6 Icici Bank - Halfyear Results To 30 September 2006 (Rs Crore)
Table 10.7 Hdfc Bank - Quarter And Half-Year Results To 30 Sept 2006 (Rs Lacs)
Table 10.8 Uti Bank - First Quarter Results To 30 June 2006 (Rs Crore)
Table 10.9 Citigroup India - Financial Highlights, 2002-06 (Rs Crore)
Table 10.10 Standard Chartered Bank - Financial Highlights, 2002-06 (Rs Crore)
Table 10.12 Nabard - Half-Year Results To 30 Sept 2006 (Rs Crore)
Table 10.13 Sidbi - First Quarter Results To 30 June 2006 (Rs Crore)
Table 10.14 Irfc - Financial Results To 31 Mar 2005 (Rs Crore)
Table 10.15 Pfc - Financial Results To 31 Mar 2006 (Rs.M)
Table 11.1 Tata Group Financial Highlights 2005-6 (Us$Bn)
Table 11.2 Reliance Group Unaudited Financial Results For The Half Year To Sep 30 2006 (Rs. Crore)
Table 11.3 Aditya Birla Group Profit And Loss Account (Rs. Crore)
Table 11.4 Aditya Birla Group Financials (Rs. Crore)
Table 11.5 Aditya Birla Group Cashflow (Rs. Crore)
Table 11.6 Indian Oil Performance At A Glance 2001- 2006 (Us$M/Rs. Crore)
Table 11.7 Infosys Technologies Unaudited Consolidated Statements Of Income (Us$M)
Table 11.8 Wipro And Subsidiaries Consolidated Statements Of Income
Table 11.10 Bajaj Auto Summary Of Financials 2006-7
Table 11.9 Maruti Udyog Unaudited Financial Results
Table 11.11 Mahindra And Mahindra Group Financial Results H1 2006-7 (Rs. Crore)
Table 11.12 Mtnl Financial Results 2004 -
Table 11.13 Bharat Sanchar Nigam Ltd, P%L Account 2006
Table 11.14 Bharti Airtel Performancwe At A Glance 2003-
Figure 2.1 India External Debt, June 2005-June 2006 (Us$Bn)
Figure 2.2 External Debt Composition By Currency, June 2006 (%)
Figure 5.1 Loan Market Liquidity, By Bank Nationality, 2005, 2006 (%)
Figure 5.2 Indian Syndicated Loan 5-Year Pricing
Figure 5.3 Maturity Profile, 2005, 2006 (%)
Figure 5.4 Structure Of Gecis Lbo
Figure 5.5 Kkr/Flextronics Legal Structure And Cash Flow Considerations
Figure 7.1 Issuance Volumes In The Indian Structured Finance Market, 2002-06 (Rs.Bn)
Figure 7.2 Abs Market Volumes, 2002-06 (Rs.Bn)
Figure 7.3 Abs Market Composition
Figure 7.4 Mbs Market Volumes, 2002-06 (Rs.Bn)
Figure 8.1 Year-On-Year Returns In International Indices, 2005-06 (%)
Figure 8.2 Sectoral Share Of Total Resource Mobilisation, 2004-05, 2005-06 (%)
Figure 8.2 Annualised Volatility Of International Indices, 2005-06 (%)
Figure 8.3 P/E Ratios Of International Indices, 2003-Mar 2006