NRI trading facility integration in PIS (Power India bulls): Corporate and Investment banking division ICICI bank UK PLC

Abstract

The spurt in growth in the Indian economy has provided business opportunities in various fields which is being tapped by the existing first generation entrepreneurs. For such investments however lending is not readily forthcoming through traditional channels since there aren't any risk free cash flows or assets to be provided as security for such borrowings. Hence the trend of pledging equity holdings in existing profitable and listed firms has caught on with ambitious entrepreneurs and is being also provided by certain banks in India and abroad. This type of financing is called Promoter Financing and forms the base for this project. - '.The project aims to find out whether a bank taking on such loans on its books will find a market for the secondary sale of the same or syndication of new loans secured by a pledge of equity of firms such that the country of risk-incidence is India. The project was conducted in three phases which included educating the sample of respondent banks about the types of structures used by ICICI for providing such loans, eliciting their willingness to purchase or take part in syndication of such deals if they originate from India and finally to attempt an actual sale of a similar asset existing on ICICIUK books. The methodology involved close interaction with financial institutions including commercial and investment banks through direct meetings or tele-conferences. The project concludes mixed results for the existence of a ready market for such type of loans. The willingness of the banks depends on their geographical location as well as their prior experience with such structures. 11 out of 21 banks interviewed showed out right interest in such structures. However many of them were willing to commit only for one of the structures and required extra legal clearances and comforts for other complex structures. The third phase of the project achieved success in obtaining letter of commitment for the sale of an existing asset which was based on the structure discussed. The final documentation for the proposed sale will take place only after furnishing of certain financial information by the borrower after three weeks of submission of this report.