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Business News/ Companies / News/  People are thinking of expanding in line with an unfolding India: Sonjoy Chatterjee
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People are thinking of expanding in line with an unfolding India: Sonjoy Chatterjee

The chairman of the Indian unit of Goldman Sachs on capital raising by Indian companies and the mood among investors

Sonjoy Chatterjee says the single most important factor for investors is fiscal discipline. Photo: BloombergPremium
Sonjoy Chatterjee says the single most important factor for investors is fiscal discipline. Photo: Bloomberg

Mumbai: Sonjoy Chatterjee, chairman of the Indian unit of Goldman Sachs Group Inc., speaks about capital raising by Indian companies, the mood among investors, and the state of the markets.

Edited excerpts:

From your interaction with investors, what is making investors so positive about India?

One is the stable currency, which is helping investors a great deal. Second is the overall promise the new government holds in terms of governance and reforms. Also, change in India has been quite different from what has been seen in other countries. I know Brazil is gearing up for elections and Indonesia has just finished elections, but for India the step change has been so different that this is also something that is setting us apart.

What’s top of mind for investors in terms of priorities for the Indian government? Is it revival of growth and infrastructure?

The single most important factor for investors is fiscal discipline. Growth in infrastructure is more important for domestic industry and easing supply-side bottlenecks and controlling inflation.

Do you expect the pipeline for fund-raising to remain strong?

Yes, we should see additional qualified institutional placements (QIPs) and residual block trades. Later this year and early next year, initial public offers (IPOs) should start to pick up as well.

Is there any reason to worry about the quality of companies coming up for fund-raising? Could that damage investor experience and, hence, the ability of others to raise money?

I don’t think there is anything happening that will shake investor confidence. Simply, India Inc. broadly has not raised capital for the past three years, so you will see a great deal of capital raising. This activity is going to include companies from all sectors with diverse balance sheets—some strong, some weak, some highly leveraged and some not.

Has the pool of investors investing in India started to widen?

Not really. It largely remains the same mix of investors. We are principally seeing a large number of long-only investors coming in from the US. On the domestic side, the domestic mutual funds and, to an extent, bank treasuries.

Isn’t that restrictive or have the allocations from the existing investors increased?

Yes, allocations have increased.

Domestically, are you expecting retail investors to come back to the markets?

Yes, that should be a good thing to look forward to. Retail sentiment has definitely picked up. The PSU ETF (public sector unit-exchange traded fund) which was launched earlier this year, saw very good interest and has given good returns, which, in turn, has created confidence. Overall, one is seeing much more coming through from the domestic retail side, even if you look at it from the mutual fund perspective. The current set of tax issues related to debt funds has also pushed some momentum towards equity. So retail investor sentiment should be on the rise in the coming months and years, which is something we should look forward to.

What are your expectations for the economy?

Our broad expectation is GDP growth will move up to 6.5% next year. On interest rates, we expect rates will remain flat this year and then, perhaps, decline once inflation is under control.

Is there talk of a pick-up in private investment?

There is a fair amount of strong, positive sentiment from corporates about getting into new projects. That is quite active. People are thinking of expanding in line with the new India that is unfolding in front of them.

And what is your outlook on the equity markets?

With good flows and foreign institutional investor interest, I think the markets are robust and we should hope they may continue to be so.

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Published: 07 Aug 2014, 11:30 PM IST
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