India has been at the forefront as attractive investment destinations for foreign investors as growth in other emerging geographies have significantly slowed down mainly on account of fall in commodities prices. India has achieved growth of 27% and 13% (yoy) during the previous financial year and current half year respectively. It is also expected that inflows by these investors would see further pick up in near future.

There has been sustained flows by domestic investors in Indian capital markets. Simultaneously regulatory authorities such as Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) and others have taken various steps to ease the regulatory regime over the last 2 years

The combination of above situations provided an attractive opportunity for IL&FS to explore and develop new business product and strategy to take advantage of the opportunities emerging out of the above initiatives as early mover. Some of the key initiative and regulatory facilitators in Financial Services Sector are provided as per the table below:

Development of theme based Financing Products:

 

  • Affordable Housing Finance for Real Estate Developers
  • Renewable Energy

The Government of India (GOI) has put emphasis on development of affordable housing, SMEs and Renewable Energy.

  • RBI has issued guidelines for relaxed norms with respect to Bonds for financing of affordable housing

 

  • GOI has articulated its vision to achieve 1.75 GW of the renewable energy capacity which is four times of the current capacity. Further efforts have been taken to resolve stress in discom and facilitate reforms in power sector

 

Municipal Bonds /REITs /Infra Investment Trust

SEBI has issued guidelines for issuance of Municipal Bonds, REITs/Infra Investment Trust.

  • Corporates may develop specialise capabilities with respect to advisory solution for Municipal Bonds. It may also underwrite Bond Issuance using its Underwriting License

 

  • SEBI has also relaxed norms for Infra Investment Trust providing an opportunity for refinancing/sale of Infrastructure assets

Distressed Fund – Alternative Investment Fund

RBI has taken many initiatives to address the distress in Banking Sector which includes:

  • Facilitating Change in Promoters and Management as Strategic Debt Restructuring (SDR)

 

  • In addition to fund based products, SDR mechanism also spur M&A activities
  • Permitted Foreign Portfolio Investors to acquire default Bonds

 

  • Pass through benefit permitted for AIFs under Income Tax Act

Refinance Advisory Services

RBI has issued guidelines popularly known as 5/25 scheme and expected to offer opportunities as Advisor for refinance of existing debt of Infrastructure projects

ECB Financing

RBI has issued guidelines for issue of Rupee denominated bonds in foreign markets for the purpose of on-lending to infrastructure sector.

Further, CIC-NBFCs are also allowed to raise funds for onward lending to group companies as foreign currency denominated bonds

 

In addition to the above, other initiatives been taken in last two years which is expected to increase attractiveness of Indian Markets and provide opportunities given the close linkages of financial services segment to the economic development. Some of the initiatives are as below:

  • Relaxation of Guidelines for Foreign Direct Investments
  • Increase in Public Expenditure in Infrastructure Sector
  • Proposed GST Legislation
  • Proposal to improve Income tax act and eventual decrease in tax rates

Deepak Pareek - CFO, IL&FS Financial Services


 


Disclaimer
Opinions expressed by the Contributors are their own and do not reflect any opinion of IL&FS Financial Services on the said subject

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