MUMBAI: JPMorgan's India chief executive expects infrastructure spending, domestic demand and global liquidity to help drive Indian capital raising,
but merger activity may be curbed by a dearth of financing.
Like China, India has seen a spate of equity-raising in recent months fuelled by a surging stock market and billions of dollars in global liquidity searching for higher returns.
"Unlike a lot of other emerging markets where liberalisation was almost immediately followed by a huge capital expenditure plan for infrastructure, India has lagged," said Kalpana Morparia, who took the top India job at JPMorgan last year after 33 years at ICICI Bank, India's No. 1 private sector lender.
JPMorgan has been the second biggest manager of equity offerings from the country this year through Thursday, behind only Morgan Stanley, Thomson Reuters data show.
Poor infrastructure shaves an estimated 1 or 2 percentage points off India's annual economic growth, which slowed to 6.7 percent last year after three years of 9 percent or more. In its annual budget early this month, the government unveiled spending increases and other measures to bolster infrastructure.
Several companies in the Indian power sector, where the capacity shortfall is especially severe, are among those planning billions of dollars of equity-raising in the coming months, including Adani Power, Indiabulls Power, Rural Electrification and NHPC Ltd.
India's domestic demand, meanwhile, has helped insulate it from the ravages of the global downturn. Local consumption makes up nearly 60 percent of India's economy, compared with 35 percent in export-reliant China.
"The absolute necessity for a strong capital expenditure plan in infrastructure, coupled with a strong domestic demand across products and services, we feel makes a very compelling demand story," Morparia said in her office overlooking the Arabian Sea.
M&A SLOWDOWN
India made headlines in the last bull market with a frenzy of overseas deals such as Tata Motors' $2.3 billion Jaguar Land Rover buy, which was arranged by JPMorgan.
Morparia said it was her view that outbound activity may be curbed in part by tight global finance markets.
Bharti Airtel's planned tie-up with South African mobile carrier MTN, worth an estimated $23 billion, is an exception in an outbound M&A market that has been relatively quiet even as government-run Chinese companies backed by state banks continue to make a splash overseas.
"The Chinese government is committed for their banks to provide whatever it takes for these acquisitions, which are linked much more with the way they see they need to fill in the gap in terms of what China needs to grow," Morparia said.
"Whereas in India this is entirely a private initiative, and therefore you are reliant on the overseas bank market or the public markets to really fund this," she said.
Valuations of target companies have come off from the lofty levels of recent years. "On the other hand, financing has become a significant challenge," she said.
Morparia said while foreign companies may continue to buy Indian firms, local mergers are less likely, in part because domestic banks are forbidden from financing takeovers other than through a privatisation.
"Purely domestic consolidation I don't think will happen in India. Part of it is a mindset issue, and part is also lack of funding because the domestic banks cannot fund any domestic acquisitions," she said.
24 Jul 2009, 1642 hrs IST, REUTERS
1 comment:
I have heard enough about JP morgan.
Post a Comment