THE elements of volatility and uncertainty continue to plague the South Asia region as economies there grapple not only with external economic headwinds but also their own domestic financial issues as well. India, the region’s largest economy, and once the star of growth in recent memory, has gone through a rough patch with the World Bank recently cutting the country’s forecast growth to 6%, down from the 7.5% forecast it made back in April.
A core element within the Indian economic slowdown has been the ongoing NBFC (non-banking financial companies) crisis that was brought to fruition last year when IL&FS (Infrastructure Leasing and Financial Services) began to default on its repayment obligations leading to a domino effect of negative investment sentiment on the overall NBFC market which supports domestic consumer power within India. As one India-based banker puts it: “The ongoing NBFI crisis separated the men from the boys with companies without a strong parent unable to get financing while other companies with strong parent support getting financing at an expensive rate.”
For the interviewees The Asset spoke to during the review period, the debate often heard in the Indian capital of New Delhi was how the government was going to balance growth with governance in the coming few months and next year. Already the government has stepped up its efforts to maintain current economic growth by announcing some tax relief, but at the moment it’s a wait and watch game for the NBFC sector yet alone the country as a whole. Amid this backdrop deals were able to get done - some notable ones in India include Embassy Office Parks REIT IPO, the first time a REIT had been listed in India and Renew Power’s green bond highlighting that sustainable finance is still a key factor within the country.
In neighboring Pakistan, the economic sentiment is not much different following the one-year anniversary of the new government under Imran Khan. Despite the shift from frontier market status to emerging market status, Pakistani capital markets in recent years have gone through a challenging period with one Pakistani broker estimating that “volumes over the past two years have gone down 60%-70%.” This has led to a systematic effect on the country’s overall brokerage landscape with smaller brokerage firms closing down from either regulatory changes or the competitive environment. From 400 brokers just three years ago one Pakistani-based banker predicts that in the end there will only be 40-50 active brokers in the near future.
One bright spot in Pakistan however has been the identification of 10 privatization transactions covering M&A and equity placements, which has excited both domestic and international financial advisers craving for chunky mandates in the country.
Amid the backdrop of a generally challenging environment several institutions were able to get transactions done and push the bar when it came to key financial capital market deals in the sub-region.
In India, Citi and Kotak Mahindra Bank defended their position as the Best banks in the global and domestic categories respectively. Citi, specifically, was able to sustain growth on the subcontinent offering its corporate clients a wide arrange of solutions from its different units. Within corporate and institutional banking, the global bank was able to help key clients reach their fundraising goals. Within the domestic arena Axis Capital was once again favoured as the Best domestic corporate and institutional bank backed by its ability to be involved in market developing IPO deals over the review period. Moreover, the firm was able to play an important financial adviser role in several M&A deals within India.
Pakistan saw the likes of MCB Bank, Credit Suisse and Arif Habib take some of the top honours in the country. In a highly competitive domestic market Arif Habib for instance was able to place itself as a key partner in several of the country’s key deals. Likewise, Credit Suisse continues to be one of the most active international banks in the country looking to work on the announced upcoming privatization projects in the country.
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