'Corporate lending to rely on borrowers' track record'

Indian corporations have become more prudent in their approach to take on debt for new projects, leading to more caution towards fresh investments. In India, JP Morgan, the world’s largest bank by market cap, said clients are becoming more aware of their debt obligations, prodded by regulatory changes. JP Morgan’s senior country officer for India and vice-chair of the Asia Pacific Kaustubh Kulkarni said in an interview that the bank would look at track record of companies to fund their expansion plans. Edited excerpts:

- Shayan Ghosh & Satish John

What do you think of Indian equity markets, and do you expect capital raising to pick up pace?

In India, markets are at a reasonably healthy level from a valuation multiple perspective. Access to capital has been good and primary capital market activity is doing reasonably well, whether in terms of the amount raised till date or the number of new public offers likely to come in 2-3 months. The upcoming election process is likely to go on for 2-3 months. Post-elections, we may see a busier 2024 in terms of capital raising, assuming the election result is an appropriate government with the stability to lead.

Are corporates more keen to borrow locally, or are they looking at tapping global resources?

Larger Indian companies have good access to both local and international bank funds. But if SOFR (secured overnight financing rate) is at 5.25% or 5.5% and with credit spread added, the dollar cost on a fully-hedged basis is far more compared to borrowing at 8-8.5% in Indian market. The tendency, therefore, will be to borrow from the Indian market at that level unless companies have meaningful dollar-denominated revenues. In that case, one may be fine to borrow at 5.5-6% because primarily, one will have dollar or foreign currency revenues to address financing costs.