Temasek scouts for more investments in India

Temasek Holdings, Singapore government’s investment company, will continue to scout for investments across consumption-oriented segments in India this year, even as it’s open to opportunities from other sectors.

In the previous year, the company’s bigger investments were in consumption-oriented segments such as healthcare and pharmaceuticals, financial services (including insurance), technology (e-commerce or payment) and consumer (FMCG companies).

The investments were made across public and private companies.

“That trend is likely to continue, and that’s where we see most of the India story playing out, unless there are certain opportunities that come up from other sectors.

“We are always open to opportunities from other sectors too,” said R Venkatesh, Managing Director, Temasek Holdings Advisors India Pvt Ltd.

For the sector-agnostic investment firm, there is no preferred exit mode, and previously the company has exited through various modes such as strategic stake, secondary sales and IPOs.

On an average, the company has invested more than $1 billion every year in India across sectors such as consumer, financial services, new economy, healthcare and pharmaceuticals.

“We don’t have an industry allocation, a country allocation or any type of deal allocation. It’s entirely based on the deals that make the cart. Our investments are very much bottoms up, and depends on opportunities,” said Promeet Ghosh, also a Managing Director at Temasek Holdings Advisors.

Temasek, which started its Indian operations in 2004, has investments in companies such as Bajaj Corp, Crompton Greaves, Oberoi Realty, GMR Energy, Axis Bank, Glenmark Pharma and Sun Pharma.

India is one of the markets across the world the company is focusing on due to good macros, great demographics and a rising middle-income population, Ghosh added.

Dip in net portfolio value

Last week, Temasek posted a net portfolio value of S$242 billion for year ended March, lower from S$266 billion posted during the previous year.

This was the Singapore investment company’s first portfolio decline since the 2009 global financial crisis.

India’s exposure to that was about 5 per cent, which was a rise from 4 per cent last year.

“This is reflective of a mark-to-market fall in some of our listed portfolio companies across the world. About 60 per cent of our portfolio is listed and about two-thirds of these are exposed to markets in Hong Kong and Singapore stock exchanges, which have fallen between 15-26 per cent,” Venkatesh said.

Source: http://www.thehindubusinessline.com/companies/temasek-scouts-for-more-investments-in-india/article8840335.ece

Airtel teams up with Singtel to expand data business in 325 cities globally

Bharti Airtel and Singapore Telecommunications (Singtel) have combined resources to form an Internet Protocol Virtual Private Network (IP VPN) to deliver high-speed, secure data network coverage to enterprise customers in Asia-Pacific, the Middle East, Africa, Europe and the US.

The combined network will provide data connectivity to 325 cities across the world through 370 Points of Presence (PoP). Together, Singtel’s 200 PoPs in 160 cities around the world and Airtel’s 170 plus PoPs in 165 cities across India, Africa and Middle East will form a new network that offers a connectivity backbone to enterprises across Asia, Europe, Africa and North America.

“This association will strongly enhance our value proposition for enterprise customers by offering them a wider global reach and the largest reach within India under a single platform. In particular, this will benefit companies in the pharmaceutical, IT and IT-enabled services as well as financial services segments, which are branching out to international locations rapidly,” Manish Prakash, director for strategic ventures at Bharti Airtel, said in a joint statement issued on Tuesday.

Under this global network, multinational corporations can maintain line of sight of their operations across different regions by using high-bandwidth business applications such as cloud applications, unified communications, video conferencing and software-defined networking solutions.

“By tapping on one another’s infrastructure assets, we enhance each other’s capabilities,” said Lim Seng Kong, Managing Director of Global Enterprise Business at Singtel Group Enterprise.

Source :  http://economictimes.indiatimes.com/articleshow/52745963.cms

Japan banks enter ranks of biggest energy lenders

JapanJapanese banks, known for the risk-aversion that spared them the worst of the credit crisis, have quietly grown into some of the world’s largest energy lenders.

Mitsubishi UFJ Financial Group Inc (MUFG), Japan’s largest bank, disclosed last month it has become one of the biggest oil and gas lenders with 9.2 trillion yen, or about $85 billion, in exposure – $45 billion more than it had reported at the end of the year. Sumitomo Mitsui Financial Group Inc is not far behind with about $77 billion and Mizuho Financial Group Inc has about $48 billion, calculations based on the companies’ websites show.

The megabanks sought profits in the oil patch during the boom as Japan’s shrinking population and years of economic stagnation sapped the profitability of domestic lending. While energy is only a fraction of their business, souring loans have been a drag on earnings. MUFG sees full-year profit falling 11 per cent as negative interest rates squeeze loan profitability and bad-loan costs increase.

“Japanese banks were thought to have no exposure at all and all of a sudden they’re some of the most exposed companies around the world,” said Nicholas Smith, a strategist at brokerage CLSA Ltd in Tokyo who has covered Japanese equities for over 25 years. “Perhaps we shouldn’t be surprised, given their scramble to get overseas exposure.”

The longer oil remains around $50 a barrel, the worse it gets. MUFG and Sumitomo Mitsui reported in May that the cost of bad energy loans rose in the past 12 months to a combined $994 million. Sumitomo Mitsui said that number could rise in the next year. Mizuho didn’t disclose energy-related credit costs.

Brent gained 14 cents, or 0.3 per cent, to $52.65 a barrel on the London-based ICE Futures Europe exchange at 12:28 pm Singapore time.

“Considering that we have downgraded more than 100 rated energy companies globally since December 2015, the banks’ energy and resource-related exposures in this uncertain environment could create losses that would reduce their capital,” Raymond Spencer, an analyst for Moody’s Investors Service in Tokyo, wrote in a May 19 note.

With defaults on the rise, bank investors around the world have been demanding more information about energy lending. MUFG’s exposure jumped after the bank expanded its most recent disclosure to include refineries and pipelines, borrowers that were left out of previous reports.

“I don’t believe that proactively lending to the natural resource and energy sector is in itself a mistake,” said Nobuyuki Hirano, president of MUFG, at a May 16 briefing discussing the company’s financial results. He said the company has prepared “appropriately” for potential losses. One concern for Japanese lenders is the deteriorating finances of the US shale industry. During the boom, drillers that outspent cash flow even when oil was $100 a barrel tapped credit from Japanese banks that were pushing to expand overseas lending.

Then prices plummeted below $30. Since the start of 2015, 142 oilfield service companies and oil and gas producers have gone bankrupt, owing almost $62 billion, according to law firm Haynes & Boone.

Sumitomo Mitsui is among the lenders to Stone Energy Corp., which is in restructuring talks. MUFG and Mizuho are among Linn Energy LLC,’s creditors, company records show. Linn owed $2.55 billion on two credit lines when it filed for bankruptcy May 11. Mizuho was also a lender to Breitburn Energy Partners LP, which owed $1.2 billion on its credit line when it filed for bankruptcy May 15.

While these credit lines are split up among a dozen or more lenders, and collateral in the form of oil and gas reserves may mitigate any losses, the risk is adding up. MUFG said in April that its North American subsidiary has made $5.52 billion in loans to exploration and production companies. Almost half of those loans are now marked as “criticised,” a regulatory designation that means that, at best, the loans exhibit potential weaknesses and at worst will result in losses.

The size of Sumitomo Mitsui’s total oil and gas-related exposure to non-Japanese borrowers, which is the area most vulnerable to changes in oil prices, is 6 per cent of its total portfolio, Koichi Miyata, president of the group holding company, said at a results briefing in Tokyo on May 13. “And this is a diverse mix including oil majors, 85 per cent of which I think is fair to say is extremely good credit,” he said.

Mizuho said its bad debts in the energy and resource sector totalled about $279 million as of March. “Even based on oil prices at the moment, we’re absolutely not seeing the recording of any major concentration of credit costs,” Mizuho’s President Yasuhiro Sato said at a May 13 briefing on the bank’s financial results.

“I don’t think we need to be worried at the current point in time,” said Nana Otsuki, chief analyst at Monex Group Inc, a Tokyo-based online securities firm. “But we’ll need to watch risks more carefully next year, particularly if there are any movements in the price of oil.”

 

Source: http://www.business-standard.com/article/international/japan-banks-enter-ranks-of-biggest-energy-lenders-116060901307_1.html

To de-stress banks, Modi govt plans ‘significant’ stressed assets fund

Given the need for large chunks of equity capital to infuse new life into banks’ stressed assets, the government plans a new fund of “significant size” with this mandate, minister of state for finance Jayant Sinha said on Tuesday. A variety of other funds including the proposed National Infrastructure Investment Fund (NIIF) could help bolster the planned stressed assets fund, he added.

“We need an efficient resolution (of the issue of rising stressed assets) and recovery process for our banks,” Sinha said on the sidelines of a conference organised by rating agency Crisil on the deepening of corporate bond markets. He said a committee might be set up to take a look at what kind of haircuts would need to be taken by banks and what their sustainable levels of debt could be. While these could be commercial decisions taken by banks, the government would ensure the process is carried out with integrity, he emphasised.

Many state-owned lenders are facing a tough situation, having reported large losses owing to assets turning sour. Gross non-performing assets in the banking system at the end of March are estimated at Rs 5.7 lakh crore while the provisions set aside by banks in FY16 was Rs 1.43 lakh crore. Total losses of PSBs in FY16 was Rs 17,022 crore.

“We expect a variety of funds — distressed debt funds, special situations fund and NIIF — to participate in the equity investments in these stressed assets,” the minister said. The NIIF, intended to give a leg-up to the country’s efforts to find the elusive equity capital for its huge plans for infrastructure creation, is being set up with an initial corpus of Rs 40,000 crore, half of that from the government, which will remain a minority partner.

The NIIF, which will have several sector-specific sub-funds, is expected to catalyse financing of infrastructure projects by leveraging the corpus multiple times. Many global sovereign wealth funds including the Abu Dhabi Investment Authority, Singapore’s Temasek and Russian Direct Investment Fund have evinced interest in investing in the NIIF. The search for the CEO of the fund has reached the final stage, the minister indicated.

jayant

 

Sinha said: “There are also many other players who are looking to invest in the stressed assets of Indian banks. So we expect that there will be a vibrant market to be able to take these assets that are in need of equity capital right now.” On Tuesday, finance minister Arun Jaitley, on a visit to Japan, pitched for investments in the NIIF to Japanese investors.

While Sinha has indicated the NIIF’s participation in the proposed stressed assets fund, the former’s stated objective has been to maximise economic impact mainly through infrastructure development in commercially viable projects, both greenfield and brownfield, including stalled projects. It could also consider other nationally important projects if commercially viable.

 

Source: http://www.financialexpress.com/article/industry/banking-finance/bank-npas-centre-turns-to-stressed-assets-fund-to-cap-crisis/270598/

India: PE firm Nalanda Capital to raise $620m for third fund

Private equity firm Nalanda Capital has registered with the US market regulator Securities & Exchange Commission to raise $620 million for its new fund, according to an Economic Times report citing sources.
This will take the total corpus raised by the Singapore-resistered PE firm to $1.5 billion, the report said.
The new fund raise comes after five years as the company had raised $475 million for its second fund in 2011 and first fund of $400 million in 2007.
Nalanda Capital has built a large portfolio of India -based public-listed companies.
Some of its investments include in the companies like Just Dial, Lovable Lingerie, ELGI Equipments, TTK Prestige, Triveni Engineering and others.
Set up by ex-Warburg Pincus India managing director Pulak Prasad, the PE firm gradually raises its stake in the portfolio firms. Early this year, it had raised its holding in Mumbai-based Just Dial to 7.58 per cent.
Nalanda Capital also made some part-exits at the end of 2015 from companies like Lovable Lingerie and Triveni Engineering. The other PE firms which are focused on investing in public-listed companies, include ChrysCapital, Westbridge among others.
ChrysCapital has also closed first round of its seventh fund of $600 million in January this year. The PE firm had launched this fund in September last year and managed to raise $350 million by end of December as first round.

Last October, Westbridge Capital had also raised $575 million more to invest in Indian companies, as per a media report.

Financial inequality highest in India, China: International Monetary Fund

According to IMF, China and India have grown rapidly and reduced poverty sharply, however, this impressive economic performance has been accompanied by increasing levels of inequality.

Financial inequality is highest in India and China among Asia Pacific countries despite the two being among the fastest growing economies, IMF has said.

According to the International Monetary Fund, China and India have grown rapidly and reduced poverty sharply, however, this impressive economic performance has been accompanied by increasing levels of inequality.

“In the past, rapid growth in Asia came with equitable distribution of the gains. But more recently, while the fast-growing Asian economies have lifted millions out of poverty they have been unable to replicate the ‘growth with equity’ miracle,” the Fund said.

As per the report, China managed to increase middle class in urban areas, as did Thailand, while India and Indonesia struggled to lift sizeable portions of their populations toward higher income levels.

“In India, differences between rural and urban areas have increased, and have been accompanied by rising intra-urban inequality,” it said.

Many factors have been identified as key drivers of the inequality between rural and urban areas in China and India.

In China, rapid industrialisation in particular regions and the concentration of foreign direct investment in coastal areas have led to substantial inequalities between coastal and interior regions. Other factors also include low educational attainment and low returns to education in rural areas.

On India, the report said inter provincial inequality is lower in India than in China, and rising inequality in India has been found to be primarily an urban phenomenon.

Moreover, the rural-urban income gap has increased, and higher rural inflation has been found to be a key driver of this. Educational attainment has also been identified as an important factor explaining rising inequality in India over the past two decades, the Fund said.

The two countries have introduced a number of policies to tackle the rising inequality.

China introduced the Minimum Livelihood Guarantee Scheme (Dibao) for social protection in the 1990s. Moreover, various social programs are aiming to expand social safety nets and provide support for the development of rural areas and western regions.

In India, the government introduced the Mahatma Gandhi National Rural Employment Guarantee Act to support rural livelihoods by providing at least 100 days of employment. Programs to improve education include the National Education Scheme and Midday Meal Scheme.

The Fund lauded the JAM (Jan Dhan-Aadhaar-Mobile) initiative and said that “the JAM trinity initiative helped India in making substantial advances in financial inclusion. More recently, programs aiming for universal bank account coverage were launched”.

Source:
http://economictimes.indiatimes.com/articleshow/52106291.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

 

IMF Sees Rising Debt Challenge as Asia Stays Global Outperformer

The International Monetary Fund said rising debt levels in major Asian economies have become a significant risk, even as the region remains on track to post solid economic growth.

Asia-Pacific economies as a group will decelerate only slightly, to 5.3 percent this year and next, from 5.4 percent in 2015, the Washington-based fund said in an annual regional report published Tuesday. The IMF last month trimmed its global forecasts, and said the world was more exposed to negative shocks thanks to a prolonged weaker pace of expansion.

In Asia, domestic demand, particularly consumption, should be a key driver, but worsening global conditions and high leverage in the region may curb growth, the fund said.

“Downside risks continue to dominate the economic landscape,” the IMF said. “In particular, the turning of the credit and financial cycles amid high debt poses a significant risk to growth in Asia, especially because debt levels have increased markedly over the past decade across most of the major economies in the region, including China and Japan.”

Downward Spiral

The IMF’s singling out of debt as a growing worry is in line with recent statements. The institution warned in a report last month against what it called a self-reinforcing “spiral” of weakening growth and rising debt that could require a coordinated response by the world’s major economies.

In Asia, the IMF said Tuesday, debt levels are high, while credit growth and corporate issuance have remained strong as companies try to take advantage of still-favorable global liquidity conditions.

The ratio of corporate debt to gross domestic product has risen faster in Asia than anywhere else in the world since 2009, the IMF added, and the measure is particularly elevated in China and South Korea. Household debt is a growing worry in Hong Kong, Malaysia, Singapore and Thailand, the IMF said.

“Although part of the credit growth reflects financial deepening, some growth has been above that implied by fundamentals,” the IMF said. Financial deepening refers to the spreading availability and use of banking.

Reform Refrain

As in previous reports, the IMF called on policy makers to push ahead with structural reforms to raise productivity, including measures to boost consumption in China. The fund also flagged the risk of an over-reliance on monetary or credit policies to hold up demand, particularly if job losses in manufacturing exceed the gains in services.

On Japan, the only developed economy where it anticipates economic contraction next year, the IMF recommended moves to reduce the difference between life-time and non-regular labor contracts to allow for higher wage increases. It also suggested deregulation and a drive to increase female labor market participation.

The IMF said that recent economic policies in Japan — so-called “Abenomics” — have been “supportive,” but added that “durable gains in growth” are yet to be seen.

The fund also warned against an excess reliance on monetary stimulus. The remark comes less than a week after a surprising Bank of Japan decision to hold off on stepping up its monetary expansion jolted markets and led to a surge of the yen against the U.S. dollar.

Source: http://www.bloomberg.com/news/articles/2016-05-03/imf-sees-rising-debt-challenge-as-asia-stays-global-outperformer