Welcome to Samosa Capital’s daily briefing — the best way to stay up-to-date on India’s financial markets. Here’s what’s in today’s newsletter:

• India’s major institutions seek dollar loans,

• States move forward with privatizing their power companies,

• and, Inflation comes down slightly.

• Finally, we’ll close with Gupshup, a round-up of the most important headlines.

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—Shreyas, [email protected]

Market Update

Inflation for December came in at 5.22 percent, slightly down from 5.48 percent in November—a modest decline. Markets dropped nearly 1.50 percent, coinciding with a weakening rupee. As a result, expectations for a rate cut have diminished. The rupee has now risen to 86.68, significantly above the high-85 range it held before the U.S. jobs report on Friday.

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Dollar Loans Are Making a Comeback

Bank of India is re-entering the dollar syndicated loan market for the first time since 2012, seeking to raise as much as $400 million (₹34.7 billion). This move reflects a broader trend among Indian borrowers tapping global credit markets to diversify funding sources and secure foreign currency debt.

What’s in the loan: The loan, split into three- and five-year tranches, will be managed through the bank’s branch in Gujarat's GIFT City. The facility offers competitive interest margins of 83 basis points over SOFR for the three-year tranche and 96 basis points for the five-year tranche.

Bank of India will hold investor roadshows in Singapore on January 17 and Taiwan on January 20 to market the loan. CTBC Bank Co. and Standard Chartered Plc are the arrangers for this facility. Proceeds from the loan will be used for general corporate purposes, including increased lending activities.

We’re so back, baby: This marks the Bank of India’s first offshore borrowing since raising $200 million (₹17.3 billion) in 2012 at an interest margin of 175 basis points over LIBOR. The bank's return comes amid a surge in Indian borrowers accessing international credit markets.

• Reliance Industries Ltd. is planning a $3 billion (₹260.1 billion) loan, potentially the largest from India since 2023.

• Shriram Finance Ltd. is syndicating part of a $1.3 billion (₹112.7 billion) multi-currency social financing deal, the largest ever offshore deal by an Indian shadow lender.

• State Bank of India is marketing a ¥30 billion ($191 million or ₹16.6 billion) syndicated facility and exploring a $1.3 billion (₹108.4 billion) dollar loan, which could be the largest from the banking sector this year.

Who cares? The resurgence of dollar loans by Indian borrowers reflects their efforts to diversify funding sources and access cheaper international credit amid rising domestic costs. This trend signals growing confidence in India’s creditworthiness and deeper integration into global financial markets, potentially fueling economic growth and expanding the global footprint of Indian businesses.

Power Companies Move Forward With Privatization

India’s most populous state, Uttar Pradesh, is advancing its plan to privatize two major power distribution companies — Dakshinanchal Vidyut Vitran Nigam and Purvanchal Vidyut Vitran Nigam — despite pushback from workers concerned about job security.

Why Privatize? Power distribution companies in India have long struggled with financial losses due to inefficiencies in metering, billing, and revenue collection. These issues have contributed to a combined loss of $6.6 billion (₹572 billion) for India’s power distributors in the year through March 2023 — the highest in nearly a decade, according to data from Power Finance Corp.

Privatization Process Begins: Uttar Pradesh Power Corp. Ltd., the state’s power operations holding company, has begun seeking an advisor to guide the privatization process. The move, aimed at ensuring a more reliable electricity supply amid growing demand, was announced in a public advertisement published in the Economic Times.

Lessons from Other Regions. Successful privatization efforts in Delhi, Mumbai, and Odisha demonstrate the potential for a turnaround when private companies take over operations. In these regions, improved metering and billing practices have reduced losses and enhanced service quality. However, replicating this success in Uttar Pradesh will require careful management: privatization plans have sparked protests among utility workers who fear job cuts and diminished security.

Inflation Cools, Kinda

India’s inflation eased to 5.22 percent in December, down from 5.48 percent in November, according to data released by the statistics ministry. While this moderation brings relief to policymakers, it remains above the Reserve Bank of India’s 4 percent target, raising questions about the timing of potential interest rate cuts.

Inflation Trends: Food inflation, which accounts for about half of the consumer price index, slowed but remained elevated, rising 8.39 percent y-o-y in December compared to 9.04 percent in November. Vegetables continued to lead the surge, with prices up 26.5 percent. Core inflation, which excludes food and fuel, showed a slight decline to 3.64 percent, from 3.72 percent in November.

Rupee Plunges to Record Low (Again): Even as inflation showed signs of cooling, the Indian rupee plunged past 86 per dollar today, hitting a new record low. The weaker currency poses challenges for an import-reliant economy, particularly with rising energy prices. India imports nearly 90 percent of its oil, and new Biden sanctions on Russian tankers have led to expectations that India will import from the much more costly Middle East.

Gupshup

Macro

• Indian assets broadly weakened as the rupee fell past 86. Rising oil prices created both a selloff in markets and also rupee weakness. Strong US jobs data led to traders pricing fewer cuts for the Fed which has reverberated to other markets. Funds have also pulled $2 billion (₹173.4 billion) from equities and $705.5 million (₹61.2 billion) from fixed-income markets.  

• The RBI is using FX swaps to ease the rupee drought and increase liquidity at the expense of rupee depreciation. The RBI used $3 billion (₹260.1) to inject liquidity at different maturities. The bank used 3, 6, and 12-month tenors essentially swapping dollars into rupees at the current date with agreements to buy them back in the future. The liquidity crunch has been driven by local investors borrowing cash to buy shares and corporations paying taxes.  

• India is going to reject oil tankers that were just sanctioned by the USfor their involvement in moving Russian cargo across the globe. Oil tankers and insurers were named by the Biden administration leading to oil prices going above $80. Sanctioned vessels will not be allowed to discharge now unless they unload by March 12 from Indian ports. An Indian official commented that they believe prices will only be above $80 for a short while and that millions of oil barrels are actively being contracted now from the Middle East.  

Equities

• DMart, a brick-and-mortar grocer, fell from delivery app fears. Profits missed analyst expectations for the ninth straight quarter as DMart lost market share. To regain it, they have attempted to cut prices but Swiggy and Zomato's growth has rendered that unprofitable as well. The most hit have been corner store-style mom-and-pop stores which make up 92 percent of India’s $617 billion (₹53.5 trillion) grocery market. 

• India's Infosys and HCL anticipate muted growth as IT outsourcing giants face increased competition. Despite rising order inflows, companies have struggled to keep pace. However, net hiring in the IT sector turned positive last quarter, positioning firms to better meet demand.

• Earnings downgrades are accelerating at their fastest pace since mid-2022. JM Financial predicts this trend will intensify this quarter, driven by a weak macroeconomic environment. Stagnant private sector investments have resulted in lackluster performance, with hopes now pinned on February's budget to boost infrastructure spending.

Alts

• Asset manager PAG has acquired its second Indian packaging firm, Pravesh Industries, a pharma packaging company, reportedly with at least $375 million (₹32.5 billion) in debt. Earlier, PAG invested $1 billion (₹86.7 billion) in Manjushree Technopack, India's largest rigid plastic packaging firm. The PE team is targeting packaging to capitalize on a growing online middle class while avoiding stock market premiums.

Policy

• India's Army Chief, General Upendra Dwivedi, described the Chinese border as "sensitive but stable," emphasizing the need to rebuild trust between the two nations. He indicated that border talks are expected to resume, with the withdrawal of troops and artillery still pending.

See you Tuesday.

Written by Yash Tibrewal. Edited by Shreyas Sinha.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.