The capital markets in 2020 started on a brighter note with robust issuances, such as in the debt capital markets (DCM), as the strong momentum in 2019 continued into the early part of this year. “It was probably one of the busiest January in terms of G3 bond issuances that we’ve ever seen,” notes a senior DCM banker based in Hong Kong. But the activity came abruptly to a halt as the Covid-19 pandemic unraveled, inflicting heavy mark-to-market losses. The value destruction in the secondary market in March and April was severe and impacted both investment grade and non-investment grade credits.
As it turns out, though, Asia is coming out unscathed from the global health crisis in 2020 as far as the capital markets activity is concerned. Figures supplied by Refinitiv show the total fund raising in the equity capital markets (ECM) in Asia, outside of Japan and Australia, has risen significantly this year, surging to US$285.78 billion as at November 16, or up 59.7% from US$178.89 billion in the same period a year ago. Issuance in the G3 bond market also went up 7.5% during the same period from US$326.90 billion to US$351.58 billion.
The strong performance that we are witnessing in the capital markets this year reflects the record number of submissions The Asset received for the Triple A Country Awards 2020 as the participating banks and securities companies are eager to showcase the strength of their franchise amid Covid-19. They brushed aside the impact of the pandemic through the series of large and ground-breaking transactions that we are honouring this year.
While the health crisis has prevented the board of editors at The Asset from arranging the usual face-to-face pitch meetings in Hong Kong, Singapore, Beijing, Shanghai and Manila, it was not an issue in conducting our evaluation process. This is where technology proves its worth as physical interaction with the participating institutions and client engagements were replaced with video calls using different platforms, such as Zoom and Webex, and, of course, the old but reliable conference calls.
Amid the nationwide lockdown and volatile market environment, India nevertheless enjoys a record year in ECM issuances in 2020. A significant portion of the fund raising was arranged for the financial services sector, which was among the hardest hit by the government-imposed moratorium.
Refinitiv figures show the total ECM fund raising in India amounted to US$34.48 billion as at November 16, up 75.1% compared with US$19.68 billion in the corresponding period in 2019. Follow-on offerings – qualified institutional placement (QIP), rights issue and block trade – accounted for the bulk of the funding exercise with US$30.06 billion, with initial public offerings (IPOs) contributing US$3.41 billion.
“Who would have thought that amid the pandemic, we will see one of the most active periods in India’s equity capital markets’ history,” comments a senior banker who covers India at a Wall Street bank. “It has been an amazing combination of the primary capital requirements of corporates and financial institutions to rebuild their balance sheets and deploy capital expenditures to initiate growth.”
Reliance Industries, India’s largest publicly-traded company, raised a US$7.1 billion equivalent through a rights issue, representing the largest-ever capital markets offering in the country. A number of banks, including YES Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank, accessed the market through QIPs and follow-on public offers for a combined 474.43 billion rupees (US$6.40 billion).
The market also witnessed a number of concurrent offerings such as Bharti Airtel, which raised US$3 billion equivalent through a combination of QIP and convertible bonds, and HDFC, which raised US$2.3 billion equivalent as it combined QIP, non-convertible debenture and warrant in tapping the market.
On the other hand, Indian issuers and borrowers reduced their reliance on offshore bond market for financing as they just raised US$9 billion as at November 16, or less than half of the US$20.30 billion they arranged in comparable period in 2019. High-yield bond issuance plummeted to US$3.81 billion from US$9.22 billion during the same period. Some corporates, though, continued to subscribe to sustainable financing theme, which is evident across the region, with Shriram Transport Finance Company printing India’s first social/sustainability US dollar bond amounting to US$500 million and ReNew Power Private Limited pricing another green bond amounting to US$450 million.
Citi secured two awards in India – Best bank, Global as well as Best corporate and institutional adviser, Global – flexing the strength of its franchise across consumer banking and in capital markets as it captured the deal flows in equity, fixed income, and mergers and acquisitions.
Kotak Mahindra Bank retains the Best bank award for the fourth year in a row. It reported a profit after tax of 21.84 billion rupees (US$294.50 million) in the second quarter of financial year 2021 (April 2020-March 2021), up 27% from the same period in the previous year. Net interest income rose 17% to 39.13 billion rupees during the same period, while net interest margin was at 4.52%.
Kotak Investment Banking wins two awards – Best corporate and institutional adviser – Domestic as well as Best equity adviser. The bank played the role of left lead bank in 12 of the primary market deals in a multi-bank syndicate that it participated, demonstrating its leading role in the Indian ECM ecosystem. It advised on nine transactions with an aggregate value of about US$12.1 billion, across a diverse set of four sectors – pharma/healthcare, industrials, consumer, and technology, media and telecom (TMT) – both in listed and unlisted companies, and including three cross-border deals.
Kotak Investment has also been originating, structuring, distributing and trading a wide range of fixed income instruments, including non-convertible debentures, commercial papers, corporate loans and structured debt products.
Standard Chartered is voted as Best bond adviser on the strength of its capability to arrange both G3 and local currency bonds. The bank secured repeat mandates and brought inaugural issuers into the market. Apart from leading landmark deals, it demonstrated diversification across issuers (financial institution group and private sector corporate), currencies (US dollar, rupees and alternate currencies such as Singapore dollar), tenors (bullet, amortizing and perpetual), ratings (investment grade and sub-investment grade) and structure (senior and subordinate).
SBI Capital Markets again beats the competition for the Best loan adviser award, providing a range of project financing and loan syndication to various clients. As in the previous year, it does not restrict itself in the Indian loan market and strategically partnered with Nepalese banks to finance a project during the review period.
BofA Securities wins the Best M&A adviser award on the back of market-defining transactions, such as ORIX Corporation’s acquisition of a significant minority stake in Greenko Energy for US$980 million, and Unilever’s purchase of Horlicks from GSK for 4.6 billion euros (US$5.48 billion), representing the largest transaction ever in India’s consumer space. The bank was the financial adviser for Facebook in acquiring a minority stake in Jio Platforms worth US$5.7 billion.
Over in Bangladesh, Standard Chartered is selected as the Best bank and Best corporate and institutional adviser – Global. The bank completed significant deals such as the Evercare Group’s acquisition of a controlling stake in a leading healthcare provider Apollo Hospitals Dhaka, the first-ever acquisition of its kind in the healthcare sector in Bangladesh. It introduced an innovative cross-border digital supplier financing platform, which will enable the country’s ready-made garment sector integrate more seamlessly with the global supply chain.
Standard Chartered was also the mandated lead manager for Pubali Bank’s 7.5 billion taka (US$88.65 million) subordinated floating rate bond. This was the largest unsecured subordinated floating rate tier 2 bond issued by a private commercial bank in Bangladesh and was critical for Pubali Bank to meet the regulatory capital requirement.
The award for Best corporate and institutional adviser – Domestic goes to City Bank Capital. It introduced an innovative credit-enhanced approach in the market to help Rangpur Metal Industries raise capital amounting to one billion taka – the first-ever bank guarantee-backed zero-coupon bond in Bangladesh. It also arranged preference shares for clients, including those for Summit LNG Terminal Company amounting to 1.02 billion taka and for Confidence Power Bogra Unit II Limited amounting to 700 million taka.
Amid the pandemic, Pakistan is witnessing some shining moments in its economy, as another senior banker points out. “The country’s balance of payments has turned positive, reserves are at an all-time high and the stock market is doing well, so investors’ interest and queries are starting to come in again,” he says.
However, a number of transactions were put on hold due to Covid-19 such as the privatization of the two LNG-fired power plants as the pre-qualified bidders, the banker notes, have asked for extension since they could not inspect the assets due to travel restrictions. “The saving grace is a number of companies continued to express interest in the assets and are conducting documentation,” he adds.
National Bank of Pakistan is chosen as the Best bank, posting an after-tax profit of 26.1 billion Pakistan rupees (US$162.36 million) in the first nine months of 2020, up 60% year-on-year. The bank managed to overcome a number of negative factors, including lower credit demand on the back of reduced economic activity due to lockdowns, higher portfolio impairment and an inflationary impact on operating expenses.
Credit Suisse is voted the Best corporate and institutional adviser – Global for the fifth year in a row. With a full-fledged team covering Pakistan, it continued to advise and close deals for the Pakistan government and other key clients. It has been appointed by the Privatization Commission to execute the privatization of two LNG-fired power plants, which have been delayed due to Covid-19.
For the second consecutive year, Arif Habib wins the same three awards that it secured in 2019 - Best corporate and institutional adviser – Domestic, Best equity adviser and Best bond adviser - executing a number of ECM and DCM deals for corporates and financial institutions during the review period.
Allied Bank regains the Best loan adviser award that it previously won in 2018 as it led transactions that provided funding for a number of significant projects in different sectors, including power, renewable energy, steel, textile, cement, and paper and paperboard.
Topline Securities is another repeat winner as it retains the Best brokerage award. Amid the lockdowns due to Covid-19 and its impact on the Pakistan economy and capital markets, Topline managed to post a 20% increase in revenue during the financial year ending June 2020 with the higher contribution from its retail broking business.
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For the complete list of winning deals, please click here.
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