IFLR India Capital Markets Forum 2020


January 22, The St. Regis Mumbai


Key Takeaways









India Capital Markets 2020 Key Takeaways

In case you didn’t make it to our ninth India Capital Markets Forum, here are all the highlights


Overview of the securities markets in India

  • Downgrades on GDP growth have drown concern from both domestic and international investors 
  • Liberalisation in external commercial borrowing guidelines has increased non-bank financial corporations’ activity
  • Corporate tax cuts in September 2019 could have been done earlier to boost consumer interest
  • Corporate governance and diligence scrutiny increasing for auditors
  • Sponsors are pushing for more covenant lite packages and investment grade issuers getting more carve-outs
  • Offer documents need to shift back to materiality, currently, a lot of information goes in but not needed from investor’s point of view


Paving the way for REITs

  • Embassy real estate investment trust (REIT) was first one in Indian market
  • A lot of education needed for regulators, including Securities and Exchange Board of India (SEBI) and tax authorities
  • SEBI has been proactive in developing REIT framework but going forward, easing regulations such as promoter lock-in can help drive more issuances
  • Quality of assets and strength of sponsor made huge difference in boosting interest
  • Big potential for REITs going forward with lots of office space in India, but also retail and warehousing -Important to be transparent with regulators to ease approval process


Developments for InvITs

  • Reserve Bank of India issued a notification on October 14, 2019 to permit banks to provide credit facilities to infrastructure investment trusts (InvITs)
  • However, banks must put in a board-approved policy on exposures to InvITs
  • Retail investors not ready to hold InvITs due to short investment time horizon
  • A number of tax measures are available to drive interest, such as investments being subject to capital gains tax only at sale


IPO market: challenges and opportunities

  • Stringent requirements and continual obligations for promoters a unique concept for India but this is dragging IPO market behind
  • Concept of promoter is deep in the minds of retail investors and regulators and will take a long time to change this concept
  • Idea of promoter versus controlling shareholder more distinct in other jurisdictions, such as the US
  • Lack of differentiation in definition of tech companies has caused challenges for new age companies such as more consumer focused ones
  • Other structures, such as a special purpose asset company, have developed in other markets like the US, to help startups to list, but given the retail focused and protectionist approach of Indian regulators, these won’t happen any time soon


International debt capital markets

  • 2019 has been a good year for debt issuances, with 23% being debut issuers, but this came at the cost of the loan market which has seen a drop in the past two years
  • Waiving of withholding tax has been positive
  • Seller’s market has led to gaps in procedure and documentation, as well as issues with potential conflicts of interest between issuers and investors
  • India needs to deepen market but remains constrained when it is still very much ratings driven and the numbers of investors who can participate are limited
  • Diligence standards have improved but still needs work for domestic issuances

Corporate governance

  • Challenge to find people who are qualified to be independent directors
  • Profit pressures, commerciality, lack of understanding of law are issues that are in the way of corporate governance
  • Environmental, social and governance (ESG) issues getting more global focus
  • Large part of commercial world still living quarter to quarter and may not see the benefits of ESG
  • Regulators are determined to focus on conduct and making sure enforcement efforts are visible for market

Liberalisation of foreign investment into India
  • Single brand retail and local sourcing rules have been liberalised to increase the ease of doing business 
  • 100% foreign direct investment (FDI) automatic route permitted for contract manufacturing sector
  • Revamp of FDI categorisation means only two categories now
  • Role of investment manager versus investment adviser distinction important to keep in mind
  • Alternative investment fund structure gaining popularity because of ease of exit and repatriation for foreign investors, if investment manager adviser is Indian, can avoid FDI caps of funds




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Supporting Organizations

The magazine

Winter 2019/2020

ESG survey: Fifty shades of green

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International briefings

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