Although the existing framework for investing in domestic bonds by foreign portfolio investors (FPI) is unlikely to change, the Reserve Bank of India could “take a bit of chance” and review the possibility of allowing FPIs to buy corporate bonds with less than three-year maturity, said deputy governor HR Khan on Tuesday.

“…we will look at whether some of the areas we can review because corporate debt is slightly different from G-Sec; so, we can take a little bit of chance and see which are the areas we can do it,” said Khan at a capital markets event organized by Ficci.

He added that the central bank will indeed allow greater participation to make the bond market vibrant, but would not open ‘flood gates’ for investors. “We are not so desperate that we are going to open flood gates to hot money, but certainly we will see that there is vibrancy,” he said.

In September, the RBI laid out a framework wherein FPIs will be allowed to hold 5% of the outstanding stock of government bonds in a phased manner by March 2018 and also allowed FPIs to invest in state development loans for the first time. This would throw open an additional investment limit of R1.2 lakh crore over and above the existing $30 billion. While the government bond limits are now expressed in rupees, corporate bond investment limits are still expressed in dollars.

Khan added that the framework of enhancing investment limits in stages will deepen the domestic bond market and the RBI will study the developments before considering inclusion of domestic bonds in global bond indices.

The government and RBI have been in talks with global indices to include Indian bonds. However, such inclusion requires India to open up its bonds markets completely to foreign investors. “Right now, there is no pressing need for India to open up too fast, too much and getting into global index,” said Khan.

On developing and improving a corporate bond market, Khan said the sovereign bond market has to be deepened further as it acts as an anchor to the corporate bond market.

The recent issue of a government bond with 40-year tenure will provide a long-term anchor, he added. The central bank is also closely looking at the responses to rupee bonds issued overseas by Indian companies, also called masala bonds.

The Securities & Exchange Board of India (Sebi) is in the process of allowing foreign portfolio investors (FPIs) into the Indian commodities futures market, with the regulator aiming at releasing detailed guidelines in the next few months, chairman UK Sinha said on Tuesday.

The announcement comes after the commodities regulatory body, Forward Markets Commission, was merged with Sebi late last month.

Sinha said the regulator will also come out with new guidelines for credit rating agencies to reduce risks for debt mutual funds. Ratings agencies shouldn’t suspend ratings of a company without a proper explanation, he added.

“In certain cases, paper being rated as investment grade, the credit rating was suddenly suspended; that must be explained to investors and to the public at large. We also look whether there were any conflicts of interest in the ratings process,” Sinha said at the Ficci capital markets conference.

Sinha said Sebi “has begun the process” of looking into concentration risks, sector risks as well as company risks with respect to mutual funds’ exposure to debt papers. The regulator would also look at whether there were any conflicts of interest in the ratings process.

The regulator’s comments came amid concerns over corporate debt investments by asset managers after a unit of JP Morgan in India suffered significant market losses in late August when autoparts maker Amtek Auto’s debt was downgraded by rating agencies.

“India is one of the first countries where rating agencies are regulated and the system prevalent here is robust. What we started looking at was that why is it that in certain cases, where the papers were being rated investment grade, suddenly the rating was suspended,” Sinha said.

Sebi will also come out with new set of regulations for distribution of mutual fund (MF) products along with simplification in the know your customer (KYC) norms. “What we are looking at is how to make KYC norms simple and digital. For instance there is no need for in-person verification in a KYC,” he said.

Sinha noted an increase in use of the e-commerce platform and low penetration of mutual fund products in the country, and said Sebi has set up a committee under Nandan Nilekani to suggest ways for boosting the MF industry.

“Hopefully, in next couple of months, we will be coming out with a new set of regulations of distribution of product,” Sinha said, adding that the aim was to make transactions in mutual funds “easy and convenient”.

The new set of norms for mutual fund distribution are being worked on and “we will be able to bring about an entirely new paradigm in distribution of mutual fund products”, Sebi chairman said.

JSW Steel reported in-line results, with standalone EBITDA coming in marginally (c2.1%) above our estimates. For India operations, the impact of decline in realizations (down cR1,954/t q/q) was offset by the correction in raw material prices (lower iron ore and coal prices). Accordingly, standalone EBITDA/t improved marginally to R4,908/t (up c1.4% sequentially). Consolidated EBITDA was c5.7% above our estimate due to improved performance from coated products and Amba River coke subsidiary.

While we expect JSW to benefit from lower raw material prices, we believe pressure on domestic steel prices is expected to continue in the short term despite the imposition of safeguard duty. We remain Equal Weight (EW). Q2FY16 highlights: Management stated that production in 2Q was impacted due to the blast furnace shutdown at Vijayanagar. In line with its strategy, the company moderated exports to c10% of total sales, with retail sales growing by c80% y/y (c35% of domestic sales).

Management stated JSW’s steel capacity would increase up to c18mt (from c14mt presently) by CY15-end. The Vijayanagar unit will see expansion of 2mt, along with 1.5mt of capacity addition at Dolvi. Share of domestic iron ore is expected to increase with improving domestic supply (Karnataka mines re-starting).

SH Kelkar & Company on Tuesday raised Rs 150 crore by allotting shares to anchor investors in a pre-IPO placement. The list of anchor investors includes T Rowe and Neuberger Berman, ICICI Prudential, L&T Mutual Fund and Small Cap World Fund.

The allotment was done at a price of R180 per share. The IPO is scheduled to open for public subscription on Wednesday.

The Mumbai-based fragrance maker plans to raise R510 crore through the offer, and has fixed the price band of R173-180 per share.

The IPO consists of a fresh issue of R210 crore and an offer for sale (OFS) worth R298 crore (at the upper price band) by existing shareholders, including Blackstone Capital Partners and SH Kelkar’s non-executive director Prabha Ramesh Vaze. In 2010, Blackstone had bought a 33% stake in the company for R243 crore.

SH Kelkar & Company plans to use the proceeds of the issue for repayment of existing corporate debt, to infuse fresh funds into subsidiary company KV Arochem, and for general corporate purposes.

SH Kelkar manufacturers fragrance products and ingredients used in the pharmaceutical and fast-moving consumer goods sectors.

Keynote Corporate Services, Kotak Investment Banking and JM Financial are the financial advisors to the issue.

With regard to IndiGo, CAPA said the carrier’s next steps should include further strengthening of management structures, lesser dependence on few people at the top to broad base and institutionalise management depth. (AP)

IndiGo’s IPO, valuing its parent company at over USD 4 billion, is a significant milestone for the domestic aviation sector that has been grappling with adverse conditions over the last many years, says a report.

Aviation think tank Centre for Asia Pacific Aviation (CAPA) today said carrier’s success is more valuable as the market conditions over last 9-10 years have been extremely adverse, it noted.

The Rs 3,018-crore initial share sale of IndiGo’s parent InterGlobe Aviation today began on a promising note as the issue was subscribed 87 per cent on the first day itself. CAPA said IndiGo’s very successful IPO, that values the company at USD 4-4.2 billion is a significant milestone for the entire industry and would “structurally re-rate the sector”.

“IndiGo’s valuation also reflects a very strong confidence in the India’s aviation story especially with massive growth upside for next 3-4 decades,” CAPA said, while adding that more low cost carriers are expected to get listed in the next 1-2 years.

According to the think tank, other airlines are expected to benefit strategically post IndiGo’s IPO including a possible further upside in the listed stocks especially after third quarter results.

“More airline IPOs to follow as industry in India is at the top of a favourable cycle with lower fuel prices, stable rupee, around 15 per cent domestic and closer to 10 per cent international growth in the near term driven by 7- 8 per cent GDP growth.

“A supportive and well structured aviation policy which removes structural barriers- both regulatory and fiscal- will further strengthen the aviation industry in India,” it noted.

With regard to IndiGo, CAPA said the carrier’s next steps should include further strengthening of management structures, lesser dependence on few people at the top to broad base and institutionalise management depth.