Mumbai, February 22
Telecom major Bharti Airtel Ltd is planning to meet global investors for what could potentially be its debut dollar bond sale nearly two years after failing to pull the trigger on a similar exercise.

The country's top cellular operator has picked seven foreign banks to arrange the meetings in Asia, Europe and the United States, said two sources with direct knowledge of the deal.

The roadshow comes after Sarvjit Dhillon, chief financial officer of Bharti Enterprises, the parent company of Bharti Airtel, told Reuters the wireless carrier was hoping to raise up to US $1 billion in the fiscal year that ends in March.

The banks are arranging the global investor meetings on behalf of Bharti Airtel International (Netherlands), a unit of Bharti Airtel, the sources said, declining to be named as they were not authorized to speak to the media. A bond sale would depend on market conditions, the sources said.

The company was not immediately available for comment. Back in June 2011, Bharti met with investors but opted not to press ahead with a bond offering.

A renewed push for a potential bond sale comes as global debt markets continue to attract Asian borrowers.

However, Indian borrowers account for only US $2.05 billion of the $35 billion raised from Asian issuers in dollars, euros or yen so far this year, with only three issuers tapping investors.

Last year saw record offerings from Asia with $208.29 billion raised from 353 deals in these three currencies, with Indian borrowers accounting for only $8.15 billion in 2012.

If Bharti's bond materializes, the company will be the second-largest private sector borrower from India to tap the global bond markets this year after Reliance Industries Ltd's $800 million perpetual bond in late January.

More Indian borrowers are expected to access overseas markets for funding because the cost of domestic borrowing still remains high even after the central bank cut interest rates by 25 basis points last month.

Barclays Capital, BNP Paribas, Citigroup, Deutsche Bank, HSBC, Standard Chartered and UBS are the arrangers for the investor meet.

Bharti Airtel is rated "BBB-" by Fitch, "BB+" by Standard & Poor’s. — Reuters

Bangalore, February 22
Whether the government will reduce borrowing in the next fiscal year is too close to call, but economists polled by Reuters say its resolve to cut spending and giveaways in next week's budget will reignite investor confidence.

Finance Minister P. Chidambaram will deliver the annual budget on February 28, his last full budget before the country goes to the polls early next year. Increased spending on social welfare and other benefits has been commonplace in the budgets for many years. But analysts say the tone of this budget will be different, steering clear of populist measures - even this close to an election.

"In view of this particular election, oddly enough, there may be political ground to be made on stressing that the government is keeping with its fiscal consolidation goal," said Vishnu Varathan, economist at Mizuho Corporate Bank.

Indeed, officals involved in budget preparations told Reuters the finance ministry plans to slash the public spending target by up to 10% in the new fiscal year, which would make it the most austere budget in recent times.

Chidambaram has already slashed public expenditure in the current fiscal year to March by some nine percent from the original target.

In the Reuters poll, conducted between February 14-21, 19 of 23 economists expected the budget to help bring in foreign investment. Almost as many, 18, predicted the focus of Chidambaram's budget speech will be on slashing subsidies and government handouts. Eighteen said they expect spending cuts to mainly focus on fuel subsidies and defence. The fuel subsidy bill swelled by almost 73% in FY2012, compared to the previous year, while defence allocation rose 18% in the last budget.

The poll also predicted the finance ministry will axe spending on rural development and food subsidies. "This will not be a common man's budget simply because there is very little room for that," said Jyotinder Kaur, economist at HDFC Bank.

India's fiscal deficit target now stands at a revised 5.3% of GDP this fiscal year. Chidambaram has said he wants to get that down to 4.8% in 2013/14.

Economists in the poll were split on the chances of overall government borrowing in 2013-14 being reduced from Rs 5.7 trillion in 2012/13.

BRINGING BACK FDI: Once considered a rising star in Asia, the Indian economy has lost its shine in recent years. Preliminary estimates released earlier this month showed growth dwindled to an annual 5% rate in the current fiscal. If confirmed, that would be the slowest growth rate that Asia's third largest economy has clocked in a decade.

The poor performance is reflected in the rupee's depreciation, as the current account deficit has widened due to weak exports and slack FDI inflows. — Reuters

Mumbai, February 22
The Reserve Bank of India released final guidelines for issuing new bank licences on Friday, paving the way for corporate houses to enter the banking sector.

The central bank said it will allow applications for new bank licences until July 1, 2013, and in its statement did not exclude companies from any specific industry from applying for a new bank licence.

In draft rules issued in 2011, the Reserve Bank had excluded companies in the property and brokerage industries from applying for new bank licences.

No new bank has been formed in the country since Yes Bank in 2004.

The RBI’s stringent terms and conditions for those applying for a new bank licence include a minimum capital requirement of Rs 500 crore and a cap of 49% in foreign shareholding for the first five years. The banks should be set up under a nonoperative financial holding company.

A number of financial institutions and corporates had indicated their interest in applying for a bank licence. The Bajajs, the Aditya Birla group, the Mahindras, Larsen & Toubro, Life Insurance Corp and Anil Ambani's Reliance Capital are among those who had expressed interest. However, it is not clear how many of them will eventually apply.

After the government announced the need for another set of private banks to be licensed, the central bank issued a discussion paper in August 2010 and followed it up by releasing draft guidelines in August 2011. The government also addressed the RBI’s concerns and allowed it to supersede the boards of banks by amending the banking laws last December.

According to analysts, the new banking licenses will be awarded by the yearend.

The RBI had earlier expressed reservations in allowing industrial and business houses to set up banks, but has been under pressure from various quarters to consider applications by various industrial groups, say sources.

Under the norms announced today, industrial and business groups with a ten-year track record of good corporate governance, nonbanking financial companies and state-owned companies are eligible to apply for new banking licenses.

New Delhi, February 22
It is quite obvious now that the threat of a new low budget airline taking to Indian skies had forced domestic carriers to offer hefty fare discounts on Tuesday. The trend floated by private carrier Jet Airways to offer two million seats at Rs 2,250 has been caught on by other airlines and may also be replicated by national carrier Air India — obviously to attract more passengers.

Interestingly, however, the air venture launched by the Tata group, AirAsia, the largest budget carrier in Asia, and another private investor has also set the bosses of Indian Railways thinking on hiking first class fares of premium trains this year (like they usually do in most years) to somewhat make up for deficits suffered by the IR.

For example, the first class AC Delhi-Mumbai fare is around Rs 4,025, with that of 2-tier AC about Rs 2,360 and 3-tier AC Rs 1,700. With airlines again headed for a price war, an air trip from Delhi to Mumbai can now be bought for around Rs 3,300 turning the prospects of travellers opting for a train instead extremely low. Officials said the railway ministry compares train fares with airfares when deciding on fare hikes.

Prior to the revision in December, most of the previous revisions were limited to passengers travelling in higher classes. Even though this group comprises a small portion of people travelling by train, but they are also the ones who contribute the most toward making up for revenue losses suffered by Indian Railways every year due to subsidy it provides to passengers.

AirAsia’s impending entry is already spelling trouble for some existing airlines. According to reports, the SpiceJet stock dived 6.55% to Rs 37.80 and Jet Airways fell 4% to Rs 559.90, which, analysts say, may put more pressure on the aviation sector. “We think this is negative for the Indian carriers, especially SpiceJet given its major presence in Chennai and tier II/III cities exposure. With traffic under pressure, it would be challenging to sustain higher yields. The entry of new players could put pressure on pricing,” JP Morgan has said.

In fact, regarding questions related to ongoing airfare war, AirAsia CEO Tony Fernandes has been quoted as saying that that AirAsia could give a fair competition to everyone. Fernandes says that pricing and costs were two major factors for airlines in India and the purchase price of tickets would be the number one differentiator among airlines.

Based in Chennai, the new airline will initially focus on south Indian destinations where it already operates. However, it is expected to branch out to other regions. AirAsia, through its operations based in Thailand and Malaysia, flies to south India from several Southeast Asian destinations.

London, February 22
HSBC's asset management arm is to shut down an India-focused hedge fund run by high-profile manager Sanjiv Duggal, in spite of strong returns last year, after cash withdrawals from investors.

A spokesman for HSBC Global Asset Management told Reuters it was to close the India Alpha fund, a long-short equity fund launched in 2007. At its peak in 2008 the fund was more than $300 million in size. By the end of December it had shrunk to $85 million.

The firm said it assessed products on a range of criteria, including "assets under management, profitability, sales interest and commitment, as well as scalability".

"The HSBC India Alpha fund was reviewed in light of this to determine the extent to which the fund is aligned with the broader business strategy and it was concluded we would close the fund as it did not meet our criteria going forward."

The news came during a testing time for the $2.3 trillion hedge fund industry, with many funds struggling to win over investors after lacklustre performance in recent years.

Some investors doubt the extent to which hedge funds can shield them from falling market and benefit them during rising markets, with many concerned about the level of fees. — Reuters