CHANGING HUES OF FINANCIAL MARKETS

       The period between 2006 and 2012 can broadly be classified into the following rapid-fire economic cycles

   with corresponding features of financial markets:

    1.       Boom: during the boom period 2006-12, risk capital or equity funding was in demand. Funds were raised

     thro’ Initial Public Offers  (IPOs), follow on public offers (FPOs), Qualified Institutional Placements (QIPs)

     and Private Equity (PE). The enterprise values (EV) were very high

     2.       Recession: post Lehman crisis, the equity markets- both primary and secondary- have lost their euphoria

     from 2009 onwards. As raising funds at high EVs became difficult, debt-funding became more common.

     Concerned over high inflation, RBI raised key interest rates ( 13 times since March 10), putting the

     borrowers into difficulty, leading to Corporate debt restructuring (CDR) in many cases. CDR exercises

     involve reducing the debt burdens of the company by methods such as reduction in interest rates, longer

     repayments, conversion of debt into equity etyc. Creditors are to be convinced about the viability of the

     company with such reduced debt burden

     3.       Stimulus driven : Concessions etc. can improve the viability; turn-arounds can happen with adequate

     concessions, stimuli etc.

     4.       Stagflation

    

    source THE HINDU BUSINESS LINE Aug4,’12