Investment Scenario and the Markets in India

Most credit companies in India are quite gung-ho about the reversal in economic downturn as several companies are either in the process or already underway with new projects, opening up new avenues for investment in India. Capex plans are getting fructified with increasing interest in making investments for capacity expansion either in domestic or overseas markets. Credit growth is in fact, currently growing at 15 per cent from the lower 10 per cent in October 2009. Banking companies and the non-banking finance companies (NBFCs) with their newly accorded permission of banking licences are an even more excited lot.

Companies from varied sectors such as glass-making, pharmaceuticals and hospitals are demanding credit from banks with some companies wanting to diversify and others wanting funding for backward or forward integration.

There is a major difference in the approach by companies in gathering funds before and after the recession. Before the recession, the companies were accumulating funds to overcome recessionary debts and rationalisation of capacity while after the recession, they are in the expansion mode and to cater to their capacity expansion plans, are going in for other routes of capacity expenditure (capex). Another key route has been the foreign investment in India route, by which proposals for Foreign Direct Investment (FDI) worth over US$ 216.1 million have received government approval. The proposals include that of Zee Entertainment, Walt Disney, Max India and Hyderabad-based Soma Highways (Toll) Projects.

There are about 17 initial public offerings on the anvil now, with companies gathering funds from the markets for their capacity expansion plans. Several global majors too feel that the growth of emerging economies including India is remarkable and most of these countries will prosper in 2010 and beyond.

Siemens also has plans to make India a major centre for ‘value-priced' engineering products and would set up six new hubs in India for design, development, production and sales of such products. Sree Sakthi Paper Mills Ltd has announced that its expansion project is expected to be completed by August 2010 and is being funded partly through debt funds and partly through internal accruals. VE Commercial Vehicles on March 8 has said it will double the production capacity of its Eicher branded products to up to 8,000 units per month in the next three years to cater to the rising demand for its products. The investment for enhancing the capacity would be a part of the Rs 500-crore capex plan for the next three years that the company had earlier announced.

The government too has plans of escalating capex vide the divestment route. All accruals through divestment are being intended to be pumped back for capacity expansion in due course. The scenario is indeed very encouraging with banks, recognizing systemic constraints such as delay in contracting, now responding to the requests of project companies and concession granting authorities and willing to reschedule loans.