New Delhi, July 7 (IANS) As much as 90 per cent of private equity and venture capital investors envisage a decline in fund-raising activities over the next 6 to 12 months because of the Covid-19 pandemic, a Crisil Research survey showed on Tuesday.
According to the survey report, though the market is sitting on sufficient un-invested capital, or 'dry powder,' good investment opportunities are seen as difficult to find in the current environment.
"About 58 per cent surveyed expect investment value to decline over the coming 12 months," the report said.
"About half of them see a moderate recovery thereafter, while a fifth foresee a strong recovery."
As per the survey, two-thirds of investors see mergers and acquisitions (M&As) rising over the next 6-12 months, extending up to the next 1-2 years, and more than three-fourths see a rise in M&A activity in the 1-2 years, compared with 2019.
"With exit options limited because of weak capital market and low interest in secondary transactions from other funds, investors would look at M&As as a strategic route to check out," said Rahul Prithiani, Director, Crisil Research.
"M&A transactions with stronger players would be the more-likely option subject to demand contours and growth opportunities, extent of synergy, and availability of capital for acquisition."
Resultantly, investment decisions are expected to be delayed given the due-diligence criticality and including new parameters for evaluation in the post-pandemic world.
"Investors expect to focus on segments minimally impacted by the pandemic or those with promising opportunities, such as technology, e-commerce and healthcare," the report said.
"Over a longer term, these segments would see positive structural changes, which will drive stronger growth due to changing consumer behaviour."
Accordingly, e-commerce, technology, information technology and IT-enabled services, financial services, and lately, infrastructure and real estate have dominated the private investment market.
"Healthcare is a key sector that will garner even more interest and attention post pandemic," the report said.
New Delhi, Aug 8 (IANS) Public sector banks would need to increase their provisioning buffer factoring in the incremental provisioning requirement on restructured loans and potential NPAs, a report said.
To discourage rampant and unviable restructuring, the RBI has now mandated that banks will be required to make high provisions at 10 per cent on restructured retail/corporate loans (20 per cent on corp loans for banks outside inter-creditor agreement).
According to analysts, higher provisioning cost would deter unwarranted restructuring. But, this would put pressure on the PSBs to accelerate the pace of increasing their provisioning buffer or disallow restructuring, even in genuine case of stress due to the Covid-19 pandemic.
"Assuming Covid-19-induced stressed loans at 10-15 per cent and at least 50 per cent restructured in the worst case, our rough calculations show systemic level immediate additional provisioning cost at 10 per cent could be 50-75 bps," Emkay Global Financial Services said in a report.
This would mean certain banks would fare better while restructuring loans under stress owing to the pandemic. While ICICI/Axis carry contingent provisions of 125-130 bps, HDFCB/KMB/IIB/RBL have around 60 bps. But large PSBs have contingent provisions of just 10-15 bps.
"Thus, we believe that some banks may have to further accelerate their provisioning buffer, factoring in the incremental provisioning requirement on restructured loans and potential NPAs," Emkay said in its report.
The provision required for restructured loans, however, provides for reversal of 50 per cent of provisioning on retail loans in case the borrower pays 20 per cent residual debt, and the balance 50 per cent on payment of another 10 per cent without slipping into NPA.