'Crisis has made cos dependent on local debt market'

MUMBAI: Top corporates are helping their vendors stay afloat to ensure a smooth supply of spares. Some of them are offering guarantees to help suppliers access funds.

Speaking at the Financial Management Summit organised by ET, Larsen & Toubro CFO YM Deosthalee said that keeping the supply chain robust was a challenge for large companies as well as SMEs. Since vendors were unable to access capital, he felt, corporates should offer them solutions.

Mahindra and Mahindra executive director Arun Nanda pointed out that even if a corporate is doing well it could run into trouble, if its vendor is having a payment problem. ���We actually provide credit enhancement support to vendors,��� he said. While corporates with in-house finance companies could fund buyers, it was the supxply side that needed to be addressed.

Going forward, companies expect a higher dependence on the domestic market for funding. ���While companies are selectively able to access the international market, the syndication market is closed. The dependence will, therefore, be on the domestic market and going forward, it���s critical that the domestic market has some depth and for this, reforms in the insurance and pension sector are important,��� said Mr Nanda.

The financial crisis has made corporates increasingly dependent on the domestic debt market. Delivering the chairman���s address at the summit, JP Morgan India CEO Kalpana Morparia said that a major gap in domestic financing is the ban on funding local acquisition. ���Indian banks can finance international acquisition, but can���t do the same in India. Rather than putting a complete embargo on lending, we need to make sure that there are safeguards to ensure that lending limits are met,��� she said.

According to Ms Morparia, corporates will have to eventually turn to the international market. ���Very quickly all large banks will hit exposure caps to various sectors, which means we will need greater access to the international market. This is not the best of times to tap the international market, but this is changing and spreads are contracting. I would urge the government and RBI to set up a joint group that can interact with international rating agencies because by whichever matrix I look at the Indian sovereign rating, I would not believe it is BBB-. We really need a concerted effort to put out the right information on fiscal consolidation that we will embark on the months to come,��� she said.