“Arthasabha’11” – This year’s edition of the National Finance Summit of IFMR B-School --was organized in association with Bombay Stock Exchange Ltd (BSE). It was well received by corporate executives, academics and students, who came from across the country to participate in the daylong event. It was held at International Convention Hall, BSE, Mumbai, and focused on the theme, “New Financial Paradigms for the Indian Enterprise”. The event included set of keynote speeches, and panel discussions on issues of financing the Indian multinational corporations, managing associated liabilities, and understanding the key risks faced in such expansion. The agenda went beyond the standard approaches and literature to get insight from the eminent speakers who are practitioners in the field. The summit generated awareness on less recognized facets, and a rule of thumb roadmap to handle these complex issues, as corporate India goes global.
Mr. S.Vishvanathan, MD of SBI Capital markets was the distinguished chief guest. In his keynote address, he touched upon important issues like the changes in corporate India, the need to balance growth with regulation, and lessons from events affecting other parts of the world. “Indian companies have gained expertise and confidence to take on global competition. We see smaller companies acquiring larger foreign companies,” he said. On banking, he elaborated on increasing professionalism in lending, and the broadening of the loan portfolio for tier 2 corporates to include foreign currency loans. He spoke on the bright prospects of the Indian bond market, implementation of the Basel norms and SBI Capital’s work on developing the infrastructure to support trading in the market.
Mr. Madhu Kannan, CEO and MD of BSE, was the guest of honour. His talk was on the dynamics and trends in the exchange business and BSE’s initiatives to enable fast, easy and low cost access to most asset classes for retail, corporate and financial institutions. “Mobile technology has been leveraged to leapfrog lacunae in physical infrastructure to give low cost, convenient access,” he said in the context of BSE’s mobile trading capability. He listed improving price discovery by innovation in market micro structure, developing products to meet sophisticated needs of institutions and lowering of membership costs to reach a larger customer base as major areas of focus for the exchange.
The morning keynote address titled “Financing Challenges and Choices facing Indian multinationals” by Mr.Srikanth, Deputy CFO of RIL elicited tremendous interest. Mr. Srikant spoke extensively about the increasing depth of the Indian equity markets, allowing companies to issue follow on offerings and placing securities via QIPs. On the debt side, Indian firms are a major and continuously growing borrower in offshore bond markets. Financial institutions were the primary borrowers. “Despite rising cost of borrowing, there’s been little increase in credit spreads”, he added. He spoke of the tightness in the secondary bond markets and the inadequate credit availability for sub AA borrowers as major factors for tapping bond markets abroad. “The advantages include very large issuances for long tenures at cheap rates to a much wider investing community. Fixed rates are possible for long tenors” he said. He then shared his views on how lengthy approval processes are limiting the application of credit from export schemes which actually comes cheaper.
Mr. S.Vishvanathan, MD of SBI Capital markets was the distinguished chief guest. In his keynote address, he touched upon important issues like the changes in corporate India, the need to balance growth with regulation, and lessons from events affecting other parts of the world. “Indian companies have gained expertise and confidence to take on global competition. We see smaller companies acquiring larger foreign companies,” he said. On banking, he elaborated on increasing professionalism in lending, and the broadening of the loan portfolio for tier 2 corporates to include foreign currency loans. He spoke on the bright prospects of the Indian bond market, implementation of the Basel norms and SBI Capital’s work on developing the infrastructure to support trading in the market.
Mr. Madhu Kannan, CEO and MD of BSE, was the guest of honour. His talk was on the dynamics and trends in the exchange business and BSE’s initiatives to enable fast, easy and low cost access to most asset classes for retail, corporate and financial institutions. “Mobile technology has been leveraged to leapfrog lacunae in physical infrastructure to give low cost, convenient access,” he said in the context of BSE’s mobile trading capability. He listed improving price discovery by innovation in market micro structure, developing products to meet sophisticated needs of institutions and lowering of membership costs to reach a larger customer base as major areas of focus for the exchange.
The morning keynote address titled “Financing Challenges and Choices facing Indian multinationals” by Mr.Srikanth, Deputy CFO of RIL elicited tremendous interest. Mr. Srikant spoke extensively about the increasing depth of the Indian equity markets, allowing companies to issue follow on offerings and placing securities via QIPs. On the debt side, Indian firms are a major and continuously growing borrower in offshore bond markets. Financial institutions were the primary borrowers. “Despite rising cost of borrowing, there’s been little increase in credit spreads”, he added. He spoke of the tightness in the secondary bond markets and the inadequate credit availability for sub AA borrowers as major factors for tapping bond markets abroad. “The advantages include very large issuances for long tenures at cheap rates to a much wider investing community. Fixed rates are possible for long tenors” he said. He then shared his views on how lengthy approval processes are limiting the application of credit from export schemes which actually comes cheaper.
The morning panel discussion was on “Liability management for the Indian multinational.” The panel summarized that the crisis has been an eye opener, awareness of the importance of liability management is high in India, and that cash flow planning is vital for the same. Poor liability management was a major cause behind asset reconstruction exercises, and the financing of assets at intermediate jurisdictions creates issues of stakeholder alignment. Technology has not been leveraged to optimize liability management, and gaps in regulation and enforceability of security holder rights of foreign investors in India is a major limiting factor for sub AA borrowers.
The afternoon key note address by Mr Prabhakar Dalal, ED of EXIM Bank India was on “Financial risk management for the Indian multinational.” In the address, Mr. Dalal stressed on the need to achieve and sustain competitive advantage while understanding the risks taken for the growth. “A key management question is “How much risk to take”, he said. He concluded that the risk profile of several countries has changed, and that better capital management along with proactive approach to the risks taken for growth should be the way forward.
The afternoon panel discussion on “Major risk considerations for a global Indian enterprise,” generated tremendous interest and debate both within the panel as well as the audience. The panel summarized that regulatory risk and political risk are major considerations when expanding into advanced and emerging markets, respectively. Further what came to fore was that a dedicated risk function is absolutely necessary and must be home grown as risk management is organization and business line specific. Other risk considerations are strategy risks and the risk of losing business due to excessive risk control in the sensitive post crisis environment. The panel stressed that companies need to understand their risk appetite, plan for both the good and bad years with countercyclical approaches and be aware of cultural factors in their expansion abroad. The panel concluded that the ingenuity of the Indian entrepreneur can meet the risks and challenges of going global.
The evening session on capital markets witnessed a keynote address by Mr Prabhakaran, president-broking at IIFL, who spoke on the growth of domestic capital markets, more specifically, on investment opportunities in equities and new asset classes such as commodities. The panel discussion on “New asset classes for the Indian capital markets,” generated many ideas on capital market growth. The panel concluded that segmenting demand and understanding preferences is important in developing new asset classes, that SME is an attractive asset class which may require a dedicated infrastructure and that understanding regulatory and tax arbitrage opportunities need to be identified for developing new products in asset classes. On SME and microfinance being new asset classes, the entities on the demand side need to scale up to handle market expectations.
