IPO fund-raising in India highest since 2011

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0

Fund raising through initial public offerings (IPOs) has crossed $2.9 billion in 2016 and another $2.9 billion is to be raised through these offerings this year, according to a research report by Baker & McKenzie.

Around 22 companies are waiting to tap the markets bringing the year-end estimated total deal value to $ 5.8 billion, more than double last year’s $2.18 billion from 71 listings, and also the highest since 2011, the report said.

The report further said that 16 companies are in the pipeline to be listed domestically in 2017, raising as much as $5.86 billion, including Vodafone’s highly anticipated $3 billion IPO, which could potentially surpass the state-run Coal India’s IPO in 2010 to become India’s biggest IPO.

The report said the momentum in India’s IPO market continues to build, boosted by the central government’s push to ease of doing business in India.

The report added that Goods & Services Tax (GST) Bill which will take effect on 1 April 2017 will have a positive effect on the market.

“The GST Bill will not only bring about the immediate benefit of widening the country’s tax base and improving the revenue productivity of domestic indirect taxes, but more importantly, it sends the message to the people of India and the rest of the world that the Indian government is committed to the country’s economic reform, further bolstering India’s attractiveness as an investment destination,” said Ashok Lalwani, head of Baker & McKenzie’s India Practice.

The report said dual listing on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) of India accounted for 98.8% of Indian companies’ listings by value in 2016 year to date, raising a total of $ 2.9 billion from 19 IPOs, including ICICI Prudential Life Insurance’s $909 million IPO, which is the country’s biggest IPO this year.

A total of 33 companies are expected to dual list on both the BSE and the NSE by the end of 2016, raising a total of $4.62 billion. Improved business confidence is also driving Indian companies to look at growth and market expansion opportunities overseas by way of cross-border IPOs, the report said.

Among the 22 IPOs in the 2016 pipeline is Strand Life Sciences’ listing on NASDAQ, which if it goes ahead, will be India’s first cross-border IPO since early 2015 when Videocon d2h got listed, the report added.

Source: http://www.financialexpress.com/industry/companies/ipo-fund-raising-in-india-highest-since-2011/415830/

China’s debt more than double its GDP

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, India & International - Corporate updates | 0
China’s Debt more than GDP

China’s total borrowings were more than double its gross domestic product (GDP) last year, a government economist said, warning that debt linkages between the state and industry could be “fatal” for the world’s second largest economy.

The country’s debt has ballooned as Beijing has made getting credit cheap and easy in an effort to stimulate slowing growth, unleashing a massive debt-fuelled spending binge.

 

While the stimulus may help the country post better growth numbers in the near term, analysts say the rebound might be short-lived.

China’s borrowings hit 168.48 trillion yuan ($25.6 trillion) at the end of last year, equivalent to 249 per cent of the economy’s GDP, Li Yang, a senior researcher with a top government think tank, the China Academy of Social Sciences (CASS), told reporters yesterday.

The number, while enormous, is still lower than some outside estimates.

Consulting firm the McKinsey Group has said that the country’s total debt was likely as high as $28 trillion by mid-2014.

CASS, in a report last year, said China’s debt amounted to 150.03 trillion yuan at the end of 2014, according to previous Chinese media reports.

The most worrying risks lie in the non-financial corporate sector, where the debt-to-GDP ratio was estimated at 156 per cent, including liabilities of local government financing vehicles, Li said.

Many of the companies in question are state-owned firms that borrowed heavily from government-backed banks and so problems with the sector could ultimately trigger “systemic risks” in the economy, he said.

DRAGON IN TROUBLE
  • China’s borrowings hit ¥168 trn ($25.6 trn) at the end of last year, equivalent to 249% of the economy’s GDP
  • McKinsey Group said country’s total debt as high as $28 trn by mid-2014
  • Most worrying risks lie in the non-financial corporate sector, where the debt-to-GDP ratio was estimated at 156%
  • Problem will also affect state coffers because Chinese banks are “closely linked to the government”
  • The People’s Bank of China has announced that new loans extended by banks jumped to ¥985.5 bn last month, up from ¥555.6 bn in April

 

“The gravity of China’s non-financial corporate (debt) is that if problems occur with it, China’s financial system will have problems immediately,” Li said. He added that the problem will also affect state coffers because Chinese banks are “closely linked to the government”.

“It’s a fatal issue in China. Because of such a link, it is probably more urgent for China than other countries to resolve the debt problem,” he said.

Speaking earlier this week, David Lipton, first deputy managing director with the International Monetary Fund, also singled out China’s corporate borrowing as a major concern, warning that addressing the issue is “imperative to avoid serious problems down the road”.

Despite the concerns, China is having difficulty kicking its credit addiction. On Wednesday, the People’s Bank of China announced that new loans extended by banks jumped to 985.5 billion yuan last month, up from 555.6 billion yuan in April.

 

Source: http://www.business-standard.com/article/international/china-s-debt-more-than-double-its-gdp-116061600556_1.html

US, Europe combined infra spending less than China’s

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0

Despite a crying need for better infrastructure, investment in it has actually fallen in 10 major economies since the financial crisis, including the US, according to a new study by the McKinsey Global Institute. Meanwhile, China is still going gangbusters on roads, bridges, sewers, and everything else that makes a country run.

“China spends more on economic infrastructure annually than North America and Western Europe combined,” according to the report published Wednesday.

Economists around the world have been arguing that now is a great time to invest in infrastructure because interest rates are super-low and the global economy could use the spending jolt. “Is anyone proud of Kennedy airport?” Harvard University economist Lawrence Summers likes to ask.

The MGI report cites 10 countries where infrastructure spending fell as a share of gross domestic product from 2008 to 2013: the US, UK, Italy, Australia, South Korea, Brazil, India, Russia, Mexico, and Saudi Arabia. The study counts 11 economies, but that’s because it lists the European Union as a separate entity.

In contrast to the widespread declines, the institute says, infrastructure spending grew as a share of GDP in Japan, Germany, France, Canada, Turkey, South Africa and China. The chart from the MGI report shows China’s strength in infrastructure spending. Its bar is the highest. There’s such a thing as too much infrastructure spending, of course. At current rates of investment, China, Japan, and Australia are likely to exceed their needs between now and 2030, the McKinsey & Co-affiliated think tank says. To fund more public infrastructure, the report favours raising user charges such as highway tolls, among other measures.

To encourage more private investment in infrastructure, MGI argues for increasing “regulatory certainty” and giving investors “the ability to charge prices that produce an acceptable risk-adjusted return.”

 

Source:  http://www.business-standard.com/article/international/us-europe-combined-infra-spending-less-than-china-s-116061600030_1.html

Post Bank likely to handle DBT schemes

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0
The entire direct benefit transfer (DBT) scheme for distribution of government subsidy is likely to be handled by the Post Bank — the new payments bank which will be under the Department of Posts.

The entire direct benefit transfer (DBT) scheme for distribution of government subsidy is likely to be handled by the Post Bank — the new payments bank which will be under the Department of Posts.

“Earlier initial capital approval sought for setting up Post Bank was about Rs 300 crore which has been increased to Rs 800 crore as there is proposal now that entire DBT scheme should be handled by it as well as saving accounts currently handled by DoP should also be moved under it,” an official source told PTI.

Public Investment Board (PIB) will consider this proposal in its meeting on January 15 and then send its recommendation to Cabinet Committee on Economic Affairs for final approval, the official said.

The Reserve Bank of India has granted Payments Bank permit to the postal department, which has 1.55 lakh branches across country and already provides financial services.

Pilot for the Payments Bank is set to start from January 2017 while full-fledged operations are to start from March 7, 2017.

Under DBT scheme government directly transfer subsidies in to bank account of people eligible for it. Subsidies of around 35-40 government schemes are covered under it including that provided on domestic LPG connections.

As per official data, till December 27 around Rs 40,000 crore was directly reaching the beneficiaries through various schemes.

As many as 40 international financial conglomerates, including World Bank and Barclays, have shown interest to partner with Postal Department for the payments bank.

The DoP has shortlisted six consultants including McKinsey, KPMG, Ernst and Young and PricewaterhouseCoopers. The postal department expects to finalise consultant for setting up of payment banks by end of this month.

At the end March 2015, the DoP housed around 20 lakh saving accounts which held total deposit of about Rs 47,800 crore. The payment bank wing of DoP is also proposed to manage these accounts.

As per RBI guidelines, payments banks would offer a limited range of products such as demand deposits and remittances.

They will, however, not be allowed to undertake lending activities and will initially be restricted to holding a maximum balance of Rs 1 lakh per individual customer.

They will be allowed to issue ATM or debit cards as also other prepaid payment instruments, but not credit cards.

Source: http://www.financialexpress.com/article/industry/banking-finance/post-bank-likely-to-handle-dbt-schemes/191551/