JPMorgan Sees $6.3 Billion Share Sales by March: Corporate India
India can sell 386 billion rupees ($6.3 billion) of shares in companies such as Axis Bank Ltd. (AXSB) and Larsen & Toubro Ltd. (LT) by March as it seeks to narrow the budget deficit, the head of JPMorgan Chase & Co. (JPM)’s local unit said.
Prime Minister Manmohan Singh’s government can reach its 400 billion-rupee target for the fiscal year through March 31, Kalpana Morparia, head of the U.S. lender’s local operations, said in an interview with Bloomberg TV India in Mumbai. Sales so far have raised 13.3 billion rupees, the Department of Disinvestment’s website shows.
“Four hundred billion rupees is absolutely doable,” Morparia said. “There is great underlying interest from foreign institutional investors in India. As long as there is a stable government in place, we will continue to do well.”
Cutting the budget deficit to a six-year low of 4.8 percent of gross domestic product is crucial to avert a junk rating for Singh, whose government has been hobbled by an anti-incumbent wave in recent state elections. Weakened by graft allegations, elevated inflation and decade-low economic growth, his administration has struggled to sell state assets, meeting only 3 percent of the annual goal.
The benchmark 30-stock S&P BSE Sensex (SENSEX) has risen less than 10 percent this year compared with a 26 percent rally in 2012, undermining Singh’s asset-sale plan. Speculation of an imminent stimulus taper by the U.S. Federal Reserve, the risk of a sovereign credit downgrade by Standard & Poor’s, the rupee’s tumble to a record and Singh’s failure to curb inflation also damped demand for Indian assets.
Things may have taken a turn for the worse for Singh after his Congress party was trounced in four of the five states that held local elections over the past month, said U.R. Bhat, managing director of Dalton Capital Advisors India Pvt., a unit of U.K.-based Dalton Strategic Partnership LLP that has $2 billion of assets globally.
Voters punished Singh’s ruling coalition, less than six months before he faces national polls, by handing the main opposition Bharatiya Janata Party victories in the states of Chhattisgarh, Madhya Pradesh and Rajasthan. The BJP and the upstart Aam Aadmi Party took Delhi, reducing Congress to eight seats out of the total 70.
“The current government won’t have the stomach to take any tough decision that will benefit the economy,” Bhat said in an interview. “After the state polls, they have their back to the wall. Any decision will depend on a new government.”
India’s lowest investment-grade credit rating may be cut to junk next year unless national elections due by May lead to a government capable of reviving economic expansion, Standard & Poor’s said in November. HSBC Holdings Plc predicts growth in Asia’s third-biggest economy may slow to 4 percent in the year through March 2014 following a 5 percent expansion in the prior period, the slowest since 2003.
The finance ministry will seek cabinet approval for sale of government stakes in ITC Ltd. (ITC), Larsen & Toubro and Axis Bank to raise funds, three finance ministry officials with direct knowledge of the matter said last month. India holds stakes in these three companies through Specified Undertaking of the Unit Trust of India, formed in 2003.
The government is also looking to sell a 10 percent stake in Indian Oil Corp., the nation’s biggest state-owned refiner and a 5 percent stake in Coal India Ltd. (COAL), the world’s largest producer of the fuel.
“These are the kind of low-hanging reforms that the government can carry out easily,” said Arun Singh, an economist at Dun & Bradstreet Information Services India Pvt. in Mumbai. “I don’t expect any opposition or constraint.”
Investors last week subscribed to more than six times the shares on sale of Power Grid Corp. of India Ltd., showing demand for assets in the world’s second-most populous nation.
“The Power Grid offering shows that there will be substantial appetite for good quality companies priced at reasonable valuation,” said Saurabh Mukherjea, chief executive officer for institutional equities at Mumbai-based Ambit Capital Pvt. “Still, it is too early to say whether the government will be able to meet the steep target they have set for themselves in the next three months.”
India’s benchmark stock index surged to a record yesterday and has gained 9.4 percent this year, making it the best performer among the four largest emerging markets, and trades at 13.8 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 10.6 times.
Global investors bought $18.4 billion of local shares, the most in Asia after Japan, data from the market regulator show. That is still about 13 percent less than a year ago and they turned net sellers in the three months through August, according to data compiled by Bloomberg.
“Our strategists have been overweight India, and on the ground, I actually believe that it is so,” Morparia said.
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