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‘Debt Capital Market in India is Still Nascent’

March, 2018

CFO Insights on Financial Services

Rajashree Nambiar, Chief Executive Officer & Executive Director, India Infoline Finance Limited

What are your views on the current macro-economic outlook?

India is one of the fastest growing economies of the world today, there is a stable government that is gradually accelerating the pace of reforms; initiatives such as demonetization and GST implementation while having short term hurdles, reinforces the conviction. Yet, there are more reasons that put the economy in a strong position. Firstly, we have a massive demographic advantage of having a large youth with prime working life ahead of them. Secondly, low growth in most large economies makes India a favoured destination. Last but not the least, rapid evolution in digitisation and a strong Government agenda creates a massive edge for India.

How are foreign financial investors (large sovereign wealth funds, private equity investors) viewing the Indian capital market?

2017 has been a great year for the markets and there is no doubt that India is one of the most favoured investment destinations. Apart from the strong macro story, reforms for bank NPA and PSU bank recapitalisation have further boosted investor confidence in the financial services sector. The recent change in outlook by Moody’s is an expected outcome and a vote of confidence.

India is currently witnessing the rise of Fintech startups. In what capacity can NBFCs, Fintechs and Banks further engage to create economic and customer value?

Because of the digital revolution in India, customer experience is going through a transformational journey at a rapid pace. This fosters a great collaborative ecosystem between banks and Fintechs. They are logical partners and complement each other. There is no competition, but only opportunity of new partnerships.

At IIFL, we have partnered with more than 14 Fintechs with more in pipeline. Work happens across various stages of the customer journey – starting with sourcing and going through the appraisal and disbursal process. For example, in our Digital Finance business, there is no single physical sales channel, sourcing happens through API integration with partners, authenticated using Aadhar and credit rated using analytics driven algorithms.

What is your outlook on consolidation among Indian NBFCs?

NBFCs are an important part of the banking sectors, driving financial inclusion and bringing in distribution and reach in India. They had a great run in the last five years, whereas PSU banks have faced challenges. There are different business models and chosen niches and target segments.

What are IIFL’s capital requirements for next 12-24 months? What sources of funding do you plan to consider?

We are a very profitable business and we have marquee names in our investor list, so raising capital will not be a concern. However we are well capitalized for the next 12-24 months. We keep a balanced mix of equity and debt, recent times have seen higher share of debt as the markets have been favourable; will continue to balance as per  market

In your experience, do you see debt capital markets playing a significant role in future financing for India Inc.?

In the recent years, we have seen several enabling changes including the large exposure framework, removal of Masala bonds from the corporate bond limit, corporate bond repo, PCE by banks into corporate bonds. Debt capital market in India is still nascent and there is a lot of headroom for development.

Opinions expressed in the article are the author’s own.

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