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M&A deals drive up syndicated loans

India Inc’s mergers and acquisitions (M&A) play has given a further push to the raising of syndicated loans in the country.

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MUMBAI: India Inc’s mergers and acquisitions (M&A) play has given a further push to the raising of syndicated loans in the country. The total volume of syndicated loans by Indian entities has advanced by 13.2% in the first five months of year to $8.5 billion from $7.5 billion in the corresponding period a year ago, according to a report by Thomson Financial. M&A deals in the country rose by 48% in the period.

The list of the top ten bookrunners of syndicated loans features three Indian players — ICICI Bank, UTI and IDBI. The other lead issuers are Citigroup, Calyon, Standard Chartered, ABN Amro, HSBC Holdings, DBS Group Holdings and ING, Jerome Ongtiapco and Ulysses Roque of Thomson Financial said in the report.

However, the total number of loans issued has fallen by 45.45% to 33 issues in the period. This indicates that the loans of a higher amount are being sought by companies.

But, analysts say that, considering the prevailing interest rate levels, a further drop in the number of loans issued is expected. “With multiple rate hikes, we are seeing a drop in credit growth. While we expect the total loan issuances to drop this year, demand will continue to rise,” said Rajesh Mokashi, executive director of CARE Ratings.

The growth in manufacturing sector would continue to be robust, adds Allen Pereira, executive director of Oriental Bank of Commerce. Banks will now start deploying funds for steel, cement and textile sector, he points out.

ICICI Bank and IDBI, which have been focussed on retail lending, have witnessed a slowdown in loan issuances owing to multiple rate hikes and also the central bank asking banks to re-balance their credit portfolio to focus on priority sector lending.

“Banks have started re-scheduling their credit portfolio. Though we expect a slowdown in loan issues during the year, it might not be drastic,” said Sejal Doshi, CEO of Finquest Securities.

Other Asia-Pacific countries have shown a mixed performance on the loan front. 

Australian loan volumes increased by 18%, while that in China grew by 32%. On the other hand, Japan witnessed a decline of 24.2% in the loan volume.

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