India’s valuable investment grade status hangs in three …

India’s valuable investment grade status hangs in three …


India’s catastrophic COVID-19 crisis, after years of debt accumulation and incomplete reforms, does a country advertised as a future economic power still deserve an “investment-eligible” status? It makes investors more skeptical than ever.

Due to a series of downgrades last year, India’s investment grade credit rating has been hung in a thread. The severity of the current virus wave has once again upset major institutions such as S & P, Moody’s and Fitch.

All three have warned that they have reduced or could reduce their country’s growth forecast in recent weeks, saying that government debt in GDP will jump to a record 90% this year.

In that respect, the second most populous country in the world has long been anomalous.

The median debt level of countries where Fitch is in the BBB bracket (India is BBB and both Fitch and Moody’s have been warned of downgrades) is currently around 55%, the deepest of the “junk” grades. Even in countries suffering from clubs, only 70%.

Buy bond and other rating-sensitive assets as COVID-19 is pushing up debt almost everywhere and rating agencies signal that they will wait for this latest wave to subside before making a decision. Investors have their own call.

“India still sees it as investment grade,” said Jope Hanchens, head of Asian debt at NN Investment Partners, and believes the country’s economy will recover rapidly. “But we think there is at least 50/50 chance that at least one rating agency will be downgraded next year.”

Many others are also wary of rising calls for another national blockade to deal with the proliferation of new viruses.

According to JPMorgan, rating agencies are now igniting a “leap of trust.” M & G’s Eldar Vakhitov said his company’s model shows signs of downgrade, and UBS said India has the third highest debt level among the largest emerging markets after junk-rated Brazil and Argentina. It is pointed out that it will be.

UBS analysts also estimate that India needs to grow at least 10% a year for public debt to decline steadily. It hasn’t been near since 1988, according to World Bank data. The complete blockade last year saw the economy shrink by 24% in the first quarter, and Moody’s said this week it expects growth to settle in the long run by about 6%.

“We believe there is a certain risk that it (downgrade) will occur,” said Manic Naline, UBS’s Head of Emerging Markets Strategy. “It’s more of a matter of someday than whether it is.”

Neither the Indian Treasury nor the central bank responded to requests to discuss the risks of downgrades, but as Brazil and South Africa experienced, becoming a “fallen angel” is known in rating agency terms to be demoted to junk. Because it has been a wave of problems you can depart.

Reserve Bank of India headquarters in Mumbai. Due to a series of downgrades last year, India’s investment grade credit rating has been hung in a thread. The severity of the current virus wave has once again upset major institutions such as S & P, Moody’s and Fitch. | AFP-JIJI

Automatically excludes government or corporate bonds from certain high-profile investment indexes. This means that both active manager and passive “tracker” conservative funds are sold out, making things worse.

India’s government debt is not yet included in most of these indicators, so the big problem is about $ 40- $ 45 billion worth of investment-eligible corporate debt, which could also be reduced.

NN’s Huntjens believes that about 90% of Indian IG companies will be hit, and while giants like Reliance may be spared, JPMorgan’s Asia Investment Grade Corporates Index has a 7.4% share of India. , Means there are many sells.

Even with the cuts, this is not the first time India has lost investment grade status. Due to the balance of payments crisis, it was first removed in 1991, just one year after receiving the first S & P rating.

But this repetition will be a tough moment for nationalist leader Narendra Modi, who brings together supporters with the promise of advancing India on the world stage and competing with something like China.

While building a healthy stock of foreign exchange reserves, the huge population of 1.4 billion means it is the least prosperous of investment grade countries when measured at $ 2,164 per capita GDP. .. The Chinese figure is almost $ 13,000.

Subhash Chandra Garg, former director of economics in India, admits that the government’s double-digit deficit and overall debt position are “bad,” but I don’t think rating agencies will be cut again. ..

“The debt-to-GDP ratio of 90% is certainly a big concern, and we can’t continue to do that,” Garg said. “But the basic view about India is that it’s a strong economy, not a basketball case.”

“In the end, debt levels need to go down, which can only happen if growth remains strong,” added NN Hanchens. “And it can’t be based solely on (governmental) stimulus, because debt is even higher.”

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India’s valuable investment grade status hangs in three …

India’s valuable investment grade status hangs in three …


Due to India’s devastating COVID-19 crisis, investors are still “investment grade” in countries that have been touted as future economies after years of debt accumulation and incomplete reforms. I am wondering if it deserves a position.

Due to a series of downgrades last year, India’s investment grade credit rating has been hung in a thread. The severity of the current virus wave has once again upset major institutions such as S & P, Moody’s and Fitch.

All three have warned that they have reduced or could reduce their country’s growth forecast in recent weeks, saying that government debt in GDP will jump to a record 90% this year.

In that respect, the second most populous country in the world has long been anomalous.

The median debt level of countries where Fitch is in the BBB bracket (India is BBB and both Fitch and Moody’s have been warned of downgrades) is currently around 55%, the deepest of the “junk” grades. Even in countries suffering from clubs, only 70%.

Buy bond and other rating-sensitive assets as COVID-19 is pushing up debt almost everywhere and rating agencies signal that they will wait for this latest wave to subside before making a decision. Investors have their own call.

“India still sees it as investment grade,” said Jope Hanchens, head of Asian debt at NN Investment Partners, and believes the country’s economy will recover rapidly. “But we think there is at least 50/50 chance that at least one rating agency will be downgraded next year.”

Many others are also wary of rising calls for another national blockade to deal with the proliferation of new viruses.

According to JPMorgan, rating agencies are now igniting a “leap of trust.” M & G’s Eldar Vakhitov said his company’s model shows signs of downgrade, and UBS said India has the third highest debt level among the largest emerging markets after junk-rated Brazil and Argentina. It is pointed out that it will be.

UBS analysts also estimate that India needs to grow at least 10% a year for public debt to decline steadily. It hasn’t been near since 1988, according to World Bank data. With a complete blockade last year, the economy shrank by 24% in the first quarter, and Moody’s said this week it expects growth to settle in the long run by about 6%.

Manic Naline, Head of Emerging Markets Strategy at UBS, said: “It’s more of a matter of someday than whether it is.”

Neither the Indian Treasury nor the central bank responded to requests to discuss the risks of downgrades, but as Brazil and South Africa experienced, becoming a “fallen angel”-known in rating agency terms as being demoted to junk. As it is-a wave of problems that can be departed.

Reserve Bank of India headquarters in Mumbai. Due to a series of downgrades last year, India’s investment grade credit rating has been hung in a thread. The severity of the current virus wave has once again upset major institutions such as S & P, Moody’s and Fitch. | AFP-JIJI

Automatically excludes government or corporate bonds from certain high-profile investment indexes. This means that both active manager and passive “tracker” conservative funds are sold out, making things worse.

India’s government debt is not yet included in most of these indicators, so the big problem is about $ 40- $ 45 billion worth of investment-eligible corporate debt, which could also be reduced.

NN’s Huntjens believes that about 90% of Indian IG companies will be hit, and while giants like Reliance may be spared, JPMorgan’s Asia Investment Grade Corporates Index has a 7.4% share of India. , Means there are many sells.

Even with the cuts, this is not the first time India has lost investment grade status. Due to the balance of payments crisis, it was first removed in 1991, just one year after receiving the first S & P rating.

But this repetition will be a tough moment for nationalist leader Narendra Modi, who brings together supporters with the promise of advancing India on the world stage and competing with something like China.

While building a healthy stock of foreign exchange reserves, the huge population of 1.4 billion means it is the least prosperous of investment grade countries when measured at $ 2,164 per capita GDP. .. The Chinese figure is almost $ 13,000.

Subhash Chandra Garg, former director of economics in India, admits that the government’s double-digit deficit and overall debt position are “bad,” but I don’t think rating agencies will be cut again. ..

“The debt-to-GDP ratio of 90% is certainly a big concern, and we can’t continue to do that,” Garg said. “But the basic view about India is that it’s a strong economy, not a basketball case.”

“In the end, we need to lower debt levels, which can only happen if growth remains strong,” added NN Hanchens. “And it can’t be based solely on (governmental) stimulus, because debt is even higher.”

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Softbank is said to invest $ 450 million in India’s start …

Softbank is said to invest $ 450 million in India’s start …


SoftBank Group Corp. has invested $ 450 million in Swiggy. This will provide a second funding to Indian food delivery startups in weeks, as much as capital floods the world’s fastest growing internet arena.

The money came from Masayoshi Son’s Vision Fund 2, a person familiar with the matter said. Financing is awaiting approval from India’s antitrust regulators, he added, urging him not to be identified as talking about private transactions.

Bangalore-based Swiggy is Ant Group Co. It competes with several food delivery startups, including fellow unicorn Zomato backed by Tiger Global and the food delivery division of Amazon.com Inc’s Indian unit, which recently announced services to prime members with dozens of zips. Bangalore, former Bangalore City Code.

Swiggy was with Falcon Edge Capital LP and Goldman Sachs Group Inc about a week ago. Finished a $ 800 million round of funding from investors such as. The funding ended a historic week for the Indian technology industry. Over the course of four days, investors have cast at least six new unicorns or startups with a valuation of over $ 1 billion.

Global investors such as SoftBank, Tiger Global and Naspers Ltd. of South Africa believe that opportunities are expanding in the country’s startup scene. In recent years, the rapid spread of smartphones, the explosive growth of cheap Internet services, and a new generation of ambitious entrepreneurs have been seen in 1.3 billion countries.

Venture investment is Tata Consultancy Services Ltd. And Infosys Ltd. Helps diversify the Indian industry, best known by technology services companies such as. According to a Credit Suisse Group AG report last month, India has about 100 unicorns with a total market value of $ 240. 1 billion people in sectors from e-commerce and fintech to education, logistics and food delivery.

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Insights-How to Succeed in India’s METS Sector

Insights-How to Succeed in India’s METS Sector


In December 2020, the Indian government is new Australia’s economic strategy.. This identifies METS in Australia as a valuable partner in the ongoing liberalization of India’s mining sector. With 1,500 mines operating in India, new developments create new opportunities for Australian companies.

  • A new mine operation model designed to promote private sector involvement
  • National coal mine auction
  • New regulations aimed at expanding overseas investment.

This insight outlines some of the key opportunities and challenges facing future METS suppliers in India. Suggest ways to approach state-owned mining companies and identify Australian METS opportunities in skills training and development.

Please contact us for more information Varun Kukuleti, Austrade Business Development Manager, Kolkata.

Private sector establishes position in Indian mining

India offers great potential for Australia’s METS, where demand for energy and resources is skyrocketing. The Government of India wants to gather foreign expertise and capital to support the development of India’s abundant natural resources. India’s goal is to improve the self-sufficiency of minerals and resources, especially coal.

A huge program of modernization is underway. The state-owned mining industry is gradually opening its doors to private companies through mining auctions and other means. The government has also relaxed many restrictions and amended its policies to encourage private companies to enter the Indian mining industry.

Private sector activities are currently strengthening partnerships with METS providers. We are widely convinced that METS companies, including overseas METS, will help transform productivity, safety and profitability.

Major new developments create new perspectives

Australian METS companies need to be aware of three new initiatives that will drive increased demand for their products and services.

  1. New mine operating model. The government’s new mine development and operation model allows private companies to develop and operate mines. Private companies can also supply owners, including government customers, with mineral output at a fixed rate calculated per ton. This will allow mine owners to rethink the scope of new technologies in mine operations.
  2. Coal mine auction. Indian government Started auction of coal mine assets in November 2020.. A total of 19 were sold, with a 50% success rate for the first tranche. The new privatized mine has an estimated revenue of A $ 1.2 billion and employs 69,000 people at full capacity.
  3. Policy reform to increase foreign direct investment (FDI). In 2020, the government will renew the Mining and Mineral Development and Regulation Act (MMDR) Mineral Law (Revised) Law.. The law aims to open the mining sector to larger commercial activities. This is done in two ways. Use new means to make your business easier. By allowing up to 100% FDI investment in coal and lignite mines.

Procurement in the public and private sector

Increased participation of private sector parties will bring about a fundamental change in the way METS is procured in India.

Government-affiliated companies can only purchase products and services through bidding. This tends to delay procurement. In the mining sector, procurement has also become “bureaucratic”.

In contrast, the Indian private sector can purchase METS services as they please. This is streamlining METS procurement as private sector occupies a larger share of mining activity.

Similarly, the wider and faster procurement of METS will increase awareness of the value that METS in Australia can offer.

Australian METS providers are already successful in India. Geoscience australia, Maptek, Real-time equipment,and Trakblaze..

Training and skill opportunities

The mining industry is open to executive and workforce training. Opportunities can increase rapidly as individual owners strive to reach globally recognized safety standards. This trend offers great opportunities for METS in Australia.

  • Domestic training must meet local standards. This includes offering courses in the local language and minimizing the number of participants from a particular local community.
  • State-owned mining companies release a request for proposal (RFP) that training providers can answer.
  • Private mining companies may accept a direct approach or advertise opportunities.

The Australian Trade Promotion Agency recommends that Australian training providers partner with Indian training providers to provide joint answers to these requests.Austrade Prepared Indians Cross-border Educational Opportunity Report.. It corresponds to the various market entry strategies that Australian training providers can adopt to enter the Indian market.

Austrade India also facilitates connections between Australian training providers and Indian partners and organizations.

New product approval

Mine developers and operators are required to obtain a safety certificate from the Directorate General of Mining Safety (DGMS) for new products used in the mine. This can take 6 months to 4 years, depending on the value and complexity of the equipment.

Cooperation with state-owned enterprises

The majority of India’s prominent mining companies are still state-owned. This is especially true for coal mining companies. These agencies have fixed purchasing rules, and the number of approvals required increases with the value of the product or service you purchase.

Purchases are made primarily through bidding and require technical and financial bidding.

Committees with technical, financial, and research and development (R & D) expertise typically meet bimonthly or quarterly to determine procurement specifications and progress.

This often means that it can take a long time for a new project or new device or service to be approved. This increases the risk of selling to the public sector.

Cooperation with private companies

Collaboration with private companies is relatively easy. However, certification from DGMS is required to approve new equipment. Since India is a very price sensitive market, suppliers need to include import duties in their bids. This means that some value-added products can be difficult to sell.

Joint ventures with trusted private sector distributors are an effective way to mitigate risk, understand market processes, and negotiate delivery dates and prices. Distributors can also provide ongoing market development support, including after-sales service.

Business culture

Understanding the differences in Indian business culture helps Australian METS organizations manage risk.

  1. delay.. It is normal to expect some delay during negotiations with government agencies, state agencies and businesses. This is because the final agreement requires the approval of multiple stakeholders. In addition, the winning bidder often asks for changes in prices and terms and conditions after reaching a final agreement.
  2. Almost 81% of India’s workforce works in the “informal” sector.. They are tax exempt and many workers are employed at mining sites without proper contracts. This adds to the complexity of employment and operational risk management at the mine site.
  3. India has 22 official languages ​​and countless dialects. Culture varies greatly from one region of India to another. Local agents are essential to fill communication gaps, speed up the sales process and provide market support to Indian customers.
  4. Resolve the dispute. Has a reputation 40 million proceedings pending in Indian judicial system.. Arbitration is the preferred dispute resolution mechanism, but there is no arbitration body to oversee. Alternatives to international arbitration are emerging, such as the Singapore International Arbitration Center, which has a marketing office in Mumbai.

Contact Us

The Austrade has offices in six major hubs: Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bangalore.

You can help Australian METS providers by:

  • Market entry strategy
  • Introducing potential partners
  • Business advice.

For more information, please email us Varun Kukuleti, Business Development Manager in Kolkata.

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