How incredible the business fraternity is who perceives each preceding financial year as a stage for learning and an opportunity to evolve, amidst economic uphill and upheaval. Yet it remains invigorated to welcome the ensuing year with much more determination and solidity. At IFIN, we started the succeeding year FY 18-19 with brainstorming sessions amongst heads of all its verticals; set the quantitative and qualitative targets; and outlined the strategies assimilating domestic and global market headwinds.

The Q1 of the financial year 2018-19 exhibited nuances of the political and financial sector environment emanated as a result of state elections, regulatory actions, inflation estimation, the precipitous rise in crude oil and various other palpable factors across the globe. To sustain steadfast in such vagary conditions, an organisation needs its resourceful and skilled arsenal to sail through it adroitly.

The recent appalling events occurred in the financial sector viz., detection of fraudulent cases in the Banks, high provisioning on account of RBI’s new rules on non-performing assets (NPAs / bad loans), has fragmented the entire Indian Banking System as well as the financial sector.  Resultantly, Public Sector Banks (PSBs) have written off mammoth bad loans of Rs 1.20 trillion, which is nearly one-and-a-half times more than their total losses of Rs 870 billion in the 2017-18 fiscal. Besides, as a large number of Public Sector Banks have been put under Prompt Corrective Action (PCA) by RBI, the flow of liquidity in the market has gotten squeezed up which has made the fund/capital raising task onerous affecting even an ingenious set of institutions. 

Further, the RBI’s Monetary Policy Committee announced a hike in its benchmark interest rate by 25 basis points, maintaining the neutral stance, after over four years. Seemingly, this rate hike will increase the cost of funds and would affect overall business sentiments. RBI has also increased its FY19 inflation forecast for the second half of the year to 4.7% from 4.4% while keeping its growth forecast unchanged at 7.4%. Its policy action of hike in interest rate can be seen as a proactive and precautionary measure to keep the inflation under check and to focus on its objective of maintaining inflation in the targeted range of 4% in the medium term.   

Comprehensively, the entire financial sector seems to be under a lot of pressure.  Amidst tight liquidity conditions and negative business sentiments, the Banks / Financial Institutions are shying away in extending the credit facilities which has obstructed the ongoing projects - majorly the infrastructure development projects. All this might sound as a daunting scenario, but I would say this all is cyclical in nature and an implied part of the business cycle. Though such conditions make the economy vulnerable to the global factors also, I am sure with the plethora of measures and the structural/legislative reforms undertaken by the Government / Regulators over a period of time, the negative impact of vacillating events will get tapered off. At the organisational level, all we need is to act as a bellwether with a discernible and erudite approach.  Keeping this in mind, we constantly strive to evolve, diversify, innovate and deliver by way of raising capital in the overseas markets and continue to have the utmost focus on perfect housekeeping.

At political front, the recent assembly elections in Karnataka, various by-elections and Lok Sabha elections in different states, was the much talked about topic clenching the financial market attention.  Now, the financial sector eagerly looks forward to 2019 general elections.  It will closely monitor and analyse each opinion poll/every by-election result to comprehend and glean its impact on the financial market. It will be a wait and watch situation till then the conjecture goes on.

Back home, staying focused on fundraising initiatives through various channels, during the first quarter of current financial year, IFIN has successfully raised the capital from KfW IPEX-Bank (a German Exim Bank) for one of the IL&S Group companies, i.e. IL&FS Transportation Networks Limited (ITNL) which will be used for the Rapid Metro South Extension Project in northern India.  In fact, the first phase of the Gurgaon Rapid Metro Project has exemplified how public-private partnerships also have an ability to attract international funding. On this occasion, Mr. Luis-Miguel Gutierrez, Chief Representative of KfW IPEX-Bank in India stated – “This is the first ECA financing ever done to support an Indian metro project.  In India, soft loans by Development Finance Institutions (DFIs) dominate in this segment. With our financing for the benefit of the Rapid Metro line expansion in Gurugram, a completely new financing model has been introduced in the Indian market.”

Working towards “Transformation Agenda 2020 – Engineering tomorrow’s India”, the government has identified 300 highway projects, with a total length of around 15,000 km, for completion by March 2019. The interest of foreign investors has inched up for investing in Indian Infrastructure and recently IL&FS has joined hands with Japanese conglomerate SoftBank to bankroll its plans to build 20GW of solar power farms by 2025. 

IFIN, being an Infrastructure Investment Bank, could envisage myriad opportunities from such collaborations for playing a substantial role in fructifying the Government’s Agenda and witnessing the infrastructure sector growing by leaps and bounds.

Sincerely yours,
Ramesh C Bawa
Managing Director & CEO
IL&FS Financial Services Ltd (IFIN)

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