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    Strategic investors will shrug off Rupee volatility soon: Amrish Baliga, Deutsche Bank

    Amrish Baliga

    Story outline

    • Volatility remains the new normal.
    • Public sector units are oftentimes serial tappers of this market.
    • Clients who have had bond outstandings have witnessed severe volatility.
    The rupee volatility will not hurt sentiment on India and strategic investors will return to tap the capital market, says Amrish Baliga, managing director and head of financing (India) at Deutsche Bank. The 8.2% GDP growth that India posted last quarter is the best for any large economy, which makes it a positive outlier within the global construct, he tells ET.

    Edited excerpts:

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    Why are companies shying away from overseas bond markets?

    Companies aren’t really shying away from the markets as such. They are adopting a more cautious approach albeit in a state of preparedness. This paradox can be attributed to a confluence of factors that have partially put on hold the ability of issuers to tap global bond markets in the short term. This has really no correlation with the credit standing of potential issuers, which remains strong, and their secondary yields have stabilised. Unfortunately, volatility remains the new normal.

    Rising crude prices, escalating tariff battles and an outward redemption from emerging markets-dedicated funds did put global investors in a risk-off mode in the recent past. Ergo, this unholy confluence has resulted in both issuers and investors adopting a wait-and-watch approach. This could go on for a bit, but we could have the odd issuer stepping up.

    On the back of Turkey and Argentina currency crisis, interest rates are surging. How will it impact yieldhungry global investors?

    Paradoxically, we see a risk-on mode for bilateral structured finance solutions for a variety of our clients sans sectors. We have had quite a bit of trades closing within this area notwithstanding the reasons you have cited. That said, and with regard to capital market issuances, the above have resulted in a new volatility paradigm that has resulted in both investors and issuers waiting to ride some of it out. Unfortunately, volatility sometimes has its own knock-on effects. Recent example in Turkey and a precipitous drop in the lira had a negative consequence on most EM currencies which unfortunately snared the rupee as well.

    Will a rupee rout puncture overseas investor sentiment for India?

    I don’t think this has mattered at all. The 8.2% (GDP) growth in the last quarter is the best for any large economy anywhere by far and that puts India as a positive outlier within the global construct. Strategic investors will shrug off rupee volatility in the medium and long term.

    Will distressed assets create opportunities for overseas investment?

    ‘Distress’ is a generic term. You have to break this up into two-three key buckets. You have large corporates who will strategically acquire distressed assets. Distressed debt traders will buy from the secondary market. Onetime settlement offers with banks and institutions offer another segment. We were early movers in having identified and engaged in all of them. I believe the market recognises this as well given the number of opportunities we are currently evaluating.

    Large companies are vying to acquire distressed companies. Is this the right opportunity?

    Large corporates with strong balance sheets see a once-in-a-lifetime opportunity on the buy versus build opportunity at valuations which are attractive. For banks or institutions, it is a great opportunity to recapitalise balance sheets and move on.

    What is the key focus of corporate finance at Deutsche Bank?

    Our clients and our capital. We are fortuitous enough to have had predecessors who have created a strong track record and market in providing structured finance solutions to all of our clients. Often enough, we have parlayed that into big wins on advising and assisting on the large capital markets issuances within DCM (dollar/ rupee bonds) and other segments. The vice versa also holds true for capital market clients who have forayed into our structured solutions area. We have had a near 100% track record in leading all debut high-yield bonds out of India. Our financing opportunities often go hand in hand. This is one of the very big advantages of having an integrated corporate finance outfit.

    How do you differ from your rival banks?

    I do believe that a strong interplay between our traditional investment banking businesses coupled with our ability and capability to finance them — whether strategic, opportunistic or in distress — allow us to often be a ‘one-stop’ financial services provider for many of our clients. For example, we sometimes have clients caught up in capital market headwinds but could have financial commitments. We offer a loan/structured credit/ bridge-up solution that gets the client comfortable on meeting their obligations — financial or otherwise.

    Are you lagging in the overseas loan market?

    I would differ. Public sector units are oftentimes serial tappers of this market. Given the current rupeedollar volatility, we don’t believe it is currently an optimum solution. We are active on dollar financing for Indian clients with offshore requirements and balance sheets and have had large successes there.

    With the rupee’s latest slide, how pricing will differ for a bond issuer?

    It depends on who the issuer is, where the sector stands with investors, whether or not it is a follow-on issuance or do they have a traded bond in play, whether the client is naturally hedged on rupee volatility… If the client has regular dollar earnings, that’s a natural hedge without a derivative that could make the instrument a tad more expensive. Also, whether or not funds are required offshore or for dollar asset purchase or brought into India makes all the difference into the nature and type of instrument and whether a client is an appropriate candidate for a G3 bond or not.




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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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