Indian finance is witnessing some audacious moves on the global stage as well as significant shifts in the domestic regulatory environment. Two recent news items highlight these trends perfectly: Bharti Enterprises’ massive investment in the UK’s BT Group and Bajaj Finance seeking substantial offshore loans. Both these developments, while seemingly unrelated, paint a picture of an evolving financial landscape for Indian businesses.

Bharti’s Billion Dollar Bet on BT link

Bharti’s decision to acquire a significant 24.5 percent stake in BT Group for a staggering $4 billion has raised eyebrows and ignited conversations across boardrooms and bourses. At first blush, investing in a mature, slow-growth telecom market like the UK when compared to the high-growth African markets where Bharti Airtel has previously expanded seems counterintuitive. BT’s own financial figures reveal a company struggling for robust growth, with revenue still below FY20 levels and operating earnings inching up at a snail’s pace.

However, dig a little deeper and the rationale becomes clearer. BT’s valuation is notably attractive. Trading close to its book value and with key metrics like price-to-earnings and EV/EBITDA significantly lower than Airtel’s, BT presents a compelling value proposition. It’s a classic case of ‘buy low, hope for high’. BT, despite its growth challenges, isn’t a failing giant. It generates healthy EBITDA margins and offers a respectable dividend yield. Bharti likely sees this as a long-term financial investment, betting on BT’s ongoing cost-cutting and reorganisation efforts to eventually bear fruit and unlock substantial capital appreciation.

Bajaj Finance Goes Global for Funds link

On the other side of the financial spectrum, Bajaj Finance, India’s largest shadow bank, is reportedly seeking to borrow up to $500 million from offshore markets. This move is symptomatic of a broader trend. Post the Reserve Bank of India’s (RBI) tighter regulations on consumer lending, domestic funding avenues for non-banking financial companies (NBFCs) or shadow banks have become constrained. The RBI’s directive to banks to increase buffers for consumer loans has inadvertently pushed shadow banks to explore international credit markets.

Bajaj Finance, along with other players like Manappuram and Muthoot, are tapping into global liquidity via external commercial borrowing routes. This shift highlights the ripple effect of regulatory changes. While intended to curb risky lending, the RBI’s measures are prompting a re-evaluation of funding strategies within the NBFC sector. Accessing foreign funds, though potentially more expensive due to factors like exchange rate fluctuations and hedging costs, offers a crucial alternative when domestic options become limited.

Bold Moves Signal Market Evolution link

Taken together, these developments reveal a financial sector at a fascinating juncture. Indian giants are making bold international investments, seeking value in unexpected places. Simultaneously, regulatory adjustments at home are reshaping funding patterns, pushing financial institutions to diversify their resource mobilisation strategies. This evolving landscape demands agility and innovative thinking from Indian finance players.

What should we anticipate in the coming months? Expect to see more Indian financial institutions exploring global avenues for both investment and funding. The interplay between domestic regulation and international financial flows will likely define the contours of India’s financial growth story in the near future.