Loan syndication market upbeat despite high rates

Mumbai, Aug 2 | Updated: Aug 3 2005, 05:30am hrs
Despite hardening of interest rates, the sentiments in Indian loan syndication market have remained high. The corporates are increasingly tapping the loan syndication route which is quite evident by the fact that the loan syndication market is expected to witness a demand of Rs 10,000 crore in the next quarter.

Mr Nageshwar Rao, CEO, commercial banking, IDBI said that many Indian companies are still underleveraged and corporates still prefer the loan route to fund their expansion plans. Hence the loan syndication market now can expect big ticket deals in the days ahead. The core sectors continue to drive the growth for project finance with infrastructure, oil and gas and real estate leading the way.

While there has been a lot of talk about the beginning of the capex cycle, this could play a part in credit growth since late FY06 or in FY07. During various interactions with other bankers, it was understood that with corporate balance sheets becoming stronger, a huge credit demand from corporates is yet to come. IDBI Ltd has ranked first in India and ninth in Asia Pacific (ex-Japan and Australia) in the category of mandated arrangers and book-runner of syndicated loans.

IDBI Ltd is the only bank in the whole of Asia with single country operations, yet to make it to the global league. Currently IDBI Bank has a loan book size of $1.481 billion in the category of syndicated loans which accounts to 27.2% of the total market volume of syndicated loans in India and 3.3% in Asia-Pacific. Among the landmark deals by IDBI Ltd, the Rs 5000 crore Hindalco deal has been a classic case of loan syndication. It is one of the largest syndicated rupee loans in the history of debt markets in India.

With an interest rate of 7.07%, the deal was pegged at 65 bp above the five year G-Sec. With 6.8% of the market volumes in Asia-Pacific, Citigroup tops the charts in the category of syndicated loans.