Mr. Siddharth Sharma, Director, Debt Capital Market, HSBC India, visited the campus on 13
th December, 2015 to share his insights on the topic Debt capital markets with the PGP – Mumbai participants. The session was highly interactive and revolved around the advantages provided by financing debts using capital markets, as well as the risks and challenges provided by the same.
An overview was provided regarding the two options available for the companies to raise funds, bilateral/corporate banking and capital markets. The two differ in terms of pricing and flexibility, bilateral funding costing the firms significantly higher, but proving advantageous in terms of the flexibility offered. The reverse holds true for capital markets. The capital market can be further divided into: Equity capital markets (shares, debentures, warrants); Debt capital markets (G-sec, corporate bonds); and Derivatives (futures, options). The following essentials were mentioned for the debt capital market: standard credit assessment procedure, price discovery, liquidity/tradability, low re-investment risks, amongst others. Standard credit assessment procedure depends not only on the sector and the financial ratios, but also on sponsors, corporate governance and the ratings provided by various agencies. A discussion around masala bonds guided the participants in understanding how the currency risks are transferred from the issuer to the investor.
The session concluded by the explanation of lifecycle between corporate and investment banking, explained thoroughly using a few case studies. The dynamics of debt capital market was explained aptly using the example of EMAS/ MAPEX, which is a special purpose vehicle that had initially financed their road construction project between Calcutta and Singur using bilateral financing, but later they resorted to refinancing this loan using capital markets successfully.