indias-kotak-enhances-its-cb-capabilities

India's Kotak enhances its CB capabilities

The Indian financial services group ties up with KBC Financial Products of Europe to arrange foreign currency convertible bonds for local companies.
Indian financial services group, Kotak Mahindra, has entered a co-operation agreement with KBC Financial Products, a subsidiary of European KBC Bank, to manage foreign currency convertible bond (FCCB) issuance for Indian companies.

Kotak and KBC will work together to assist Indian issuers to raise FCCBs in global markets. Kotak said the move enhanced its ability to execute FCCB mandates because it gives the firm global execution and distribution capabilities.

ôThe overall capital being raised in Indian primary markets is growing significantly and all instruments including FCCBs are seeing significant growth,ö explains Chetan Savla, executive director and co-head of equity product group at Kotak Investment Banking, the investment banking arm of KMCC.

Primary issuance of FCCBs has grown to levels of around Rs240 billion ($6 billion) for the financial year ended March 31, 2007, representing a 100%increase over volumes for the corresponding period in 2005. The product seems set to continue on its growth trajectory with around Rs85 billion of FCCBs already being issued in the first four months of the current fiscal year.

Savla elaborates on what kind of issuers choose to go the FCCB route: ôIndian issuers who have low leverage or who believe the current traded price of their shares does not fully capture the intrinsic value prefer to use FCCBs to fund their capital requirements.ö

KBC Bank is part of the Brussels-listed KBC Group. Its wholly owned subsidiary, KBC Financial Products, is active in equities, credit and fund-linked securities including convertible bonds. KBC has 70 professionals in New York, London, Hong Kong and Tokyo covering global investors in convertible bonds.

ôKBC has been covering the trading of Indian FCCBs since 1996,ö says KotakÆs Savla. "It currently has coverage of around 150 FCCBs issued by Indian companies and is providing credit and quantitative research to its investor clients.ö

Competition for mandates in India is at an all time high with a number of global investment banks such as Citi and Merrill Lynch active on the ground and others such as Credit Suisse, Lehman and Morgan Stanley building up their teams and execution capabilities. In this environment, clients are calling the shots and tend to expect their advisors to have cross-border execution capabilities.

ôThe agreement with KBC completes the suite of products we offer listed Indian companies for their follow-on offerings,ö sums up Savla.
¬ Haymarket Media Limited. All rights reserved.