Alternate investment options must for corporate debt market growth

“Unless there are alternate investment opportunities available for the bond-holders, corporate debt market will not develop here,” L&T Finance Holdings president and whole-time director N Sivaraman opined

Mumbai: The government should allow alternate investment opportunities for the bond-holders to enable deeper penetration of the nascent corporate debt market in the country, reports PTI.

“Unless there are alternate investment opportunities available for the bond-holders, corporate debt market will not develop here,” L&T Finance Holdings president and whole-time director N Sivaraman told a meeting on the capital markets organised here by CII on Tuesday.

At present, majority of investors in the corporate bond market hold their investment to maturity due to lack of buyers, Mr Sivaraman and other experts opined.

“Larger participation can be ensured if active trading in the bond market is facilitated through regulations which will help in better price discovery,” Mr Sivaraman argued.

Corporate bond market holds significance in the wake of higher infrastructure spending proposed by the government in the next Plan, which can’t be funded alone by banks and domestic sources.

The government has targeted $1 trillion in infra spending during the 12th Plan period and there is a 30% funding gap already identified in this. And the government feels that an active corporate bond market can help meet this gap.

“Given the higher infrastructure spending proposal, we have to attract foreign investment to corporate debt market for infra financing,” Kotak Mahindra Bank executive-chairman and managing director Uday Kotak said.

Mr Kotak also said that participation from retail investors should be encouraged for deeper penetration.

Referring to foreign institutional investors’ (FII) participation in the corporate debt market, industry experts said FIIs are holding back their investment in corporate bond market due to unpredictability of returns.

“Infrastructure sector comprises of many sub-sectors, which are regulated by many independent regulators. So, global funds are reluctant to invest as there are frequent policy changes in these various segments of the infrastructure sectors,” KKR India Advisors director BV Krishnan said.

He further said factors like currency fluctuation, inflationary environment and higher forward premium are some of the issues which need to be addressed to attract FIIs into the domestic corporate debt market.

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Defaulters owe over Rs47,000 crore to lenders

According to RBI data, the number of defaulters having an outstanding amount of Rs10 crore and above (non-suit filed accounts) of financial institutions as on 31 March 2011, stood at 723. They owe Rs26,165.51 crore, finance minister Pranab Mukherjee informed the Rajya Sabha

New Delhi: Defaulters of Rs1 crore and above owe over Rs47,000 crore to banks and financial institutions as on 31 March 2011, reports PTI.

According to the list of people who defaulted over Rs1 crore and above in payments to various lenders, a total of 4,102 defaulters owe Rs47,594.31 crore, finance minister Pranab Mukherjee said in a written reply in the Rajya Sabha.

According to Reserve Bank of India (RBI) data, the number of defaulters having an outstanding amount of Rs10 crore and above (non-suit filed accounts) of financial institutions as on 31 March 2011, stood at 723. They owe Rs26,165.51 crore, he said.

The suit-filed accounts of Rs1 crore and above involved an amount of Rs21,428.80 crore.

The minister said in order to improve the health of the financial sector, the government and the RBI have taken various steps.

This includes prescribing prudential norms for provisioning and classification of non-performing assets, guidelines for prevention of slippages, corporate debt restructuring and other restructuring schemes.

To another query, minister of state for finance Namo Narain Meena said PSU banks have granted Rs14,12,542.71 crore worth loans to industrial houses as of 31 March 2010.

On deposits, Mr Meena said about Rs1,723.24 crore worth of such funds are lying with commercial banks as on 31 December 2010.

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SEBI to set time-frame for companies’ replies to expedite IPO applications

According to the norms, a company has to come out with its public issue within 90 days of its prospectus being approved by SEBI. If it fails, the approval lapses and the company has to restart the entire process

Mumbai: In order to expedite the clearance of initial public offer (IPO) applications, the Securities and Exchange Board of India (SEBI) is considering putting in place a time-frame within which the firms will have to respond to queries by the market regulator, reports PTI.

“We are going to make it obligatory that response to SEBI’s queries has to be given in a particular time-frame and if it is not given, the case will be closed,” SEBI chairman UK Sinha said at a CII event here.

Refuting the criticism that SEBI takes longer time to clear the IPO applications, Mr Sinha said, “But we also found that if the market is not good, if you want to delay the thing, you don’t respond to SEBI’s queries. We are going to change the rules of the game.”

The merchant bankers, he further said, would have to do the due diligence in time.

According to the norms, a company has to come out with its public issue within 90 days of its prospectus being approved by SEBI. If it fails, the approval lapses and the company has to restart the entire process.

SEBI is also going for a complete overhaul of the primary market norms and review the entire IPO process for which it has set up a group.

“Our idea is to make fund raising by corporates in India more efficient both by way of time and by way of costs.

But let me also alert you that in the process there will be some additional obligations on the intermediaries,” he said.

To help investors make informed judgement, SEBI has already asked merchant bankers (issue managers) to reduce the size of the application form for IPOs and disclose their track record of the issues managed and their performance.

“We are thinking of what kind of penalty can be imposed if there are any irregularities. We are looking at the volatility at the first day of trading, we are seriously working on that,” he added.

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