‘India sees long-term foreign flows; debt troubles unlikely’

P​.D., the CEO & MD of corporate banking, India, at JPMorgan Chase Bank
P​.D., the CEO & MD of corporate banking, India, at JPMorgan Chase Bank


  • In India, regulators have driven change by disruption and innovation, said P​.D. Singh, the CEO & MD of corporate banking, India, at JPMorgan Chase Bank

MUMBAI : India is in a bright spot and seeing steady, long-term foreign investment inflows, ​according to P​.D. Singh, chief executive and managing director of corporate banking, India, at JPMorgan Chase Bank. In India, regulators have driven change by disruption and innovation, Singh said in an interview. While companies are diversifying and raising capital, there are fewer concerns about returning to the over-levered scenario of the past, he added. Edited excerpts:

​Do you agree with ​a recent survey conducted by a foreign fund house of sovereign funds and hedge funds which showed that India​n debt is more attractive than that of China and other emerging economies?

It is not surprising considering India’s multi-decade growth potential. Certainly, we are not isolated from global developments because of our dependence on energy, etc., but India is in a bright spot and a long-term investment story. We are probably not going to see flashes in the pan. While other countries in Asean are seeing significant initial investments, there is a constant flow of long-term capital that is coming into India. We are also seeing a similar trend in the equities market. Importantly, our regulators have driven the change through disruption and innovation, and that, to me, is one of our key differentiators.

​Do you see ​Indian corporates ​deleveraging​?

Absolutely. Value creation is a result of the long period of investment in the last cycle. Indian corporates have generated a good quantum of cash and also raised equity judiciously. These pools of money have been used to deleverage. The deleveraging has improved credit profiles and brought in further efficiency in interest cost savings, even as benchmark rates have increased. The financial flexibility enables corporates to capture the next phase of opportunities, which may be organic or inorganic. The impact this can have on jumpstarting activity levels cannot be underestimated.

But if you look at the conglomerates, during the pandemic, they managed to ​repay debt. But they are ​now again raising more loans. Is this as an early sign that we are going back to high leverage?

I would say it is an indicator of opportunity, and the opportunity is sector-specific. In the telecom sector, for instance, with the advent of the latest technology and the ability to scale up, one wants to be the first to implement. This then drives efficiency, which benefits the country at large. But I do not see corporates going back very quickly to a highly leveraged scenario as huge capacities are not being added given the capacity utilization which exists currently. But while we are not seeing massive capex, there are new entrants and diversification is happening.

​Do you see Indian companies shying away from offshore foreign loans?

Indian corporates are savvy in the manner they manage their borrowings. They have displayed agility in using the available market dynamics to their advantage. In the current situation, the underlying benchmark rates in foreign currency have moved up faster than Indian rupee.

Also, forward covers are such that, in some cases, it may be cheaper to look at rupee financing if the objective is to remain fully hedged—especially in the absence of underlying exposures such as export flows.

Corporates with good quality credit have the ability to raise foreign currency financing at competitive levels, and selective transactions have been executed.

How do you look at startup financing and ​the debt that they’re raising?

We have a new economy cell with a specialized focus on the sub-segments in this sector. Given that the sector requires a bespoke approach for each situation, we bring in our best practices and offer a specialized line of products. Financing decisions are predicated on the specific situation.

What about debt refinancing? Do you see a lot of corporates now coming for refinancing?

A few years ago, quite a few corporates raised dollar bonds and ECBs (external commercial borrowings). As they complete minimum average maturities, corporates are exploring various options onshore and offshore. As credit profile improves, borrowers are in a position to negotiate better terms and pricing. The increased flexibility is beneficial for the borrowers supporting their growth plans.

​Can you enumerate some of the broad themes you are seeing?

We continue to work with clients on their outbound agenda. Many have scaled up their overseas investments to be closer to their client base and supply chains. These corporates have centralized processes and services in India, and their international growth is leading to incremental opportunities for India to act as a global hub in manufacturing and services.

The inbound story is also strong, with MNCs establishing permanent manufacturing facilities, bases and offices in multiple cities in the country and looking to tap India’s vast potential. Given that JP Morgan is a globally connected firm, we benefit from that network as well. 

The third part is the local infrastructure by the private sector and government, where again, we are connected with both sides. A lot of these have support from multilateral agencies, and we are directly or indirectly involved, wherever possible, to add value.

​Do you see Japanese financ​iers active in India? They are as it is funding some major infrastructure projects.

They are indeed playing an important role. The Dedicated Freight Corridor is probably one of the largest infrastructure investments in the country, and one of the corridors is entirely supported by them. Having said that, given the scale of investments required, there is enough for everyone.

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