The Financial Crisis and India BarCamp Delhi October 11th-12th, 2008Sunday, March 31, 13
Intro to the Financial Crisis The worst crisis since the Great Depression Sub-Prime Mortgages Loans extended to people and business with less than stellar credit worthiness Value of assets dropping quickly leaving negative equity Credit Scare of loan losses spreads beyond sub-prime mortgagesSunday, March 31, 13
Timeline Fed ignores pleas for investigating sub-prime lending – 2001 to 2004 HSBCs Mortgage chief resigns after losses hit $10.5 Billion – Feb. 2007 Bernanke says the housing sector "is a concern, but at this point we dont see it as being a broad ﬁnancial concern or a major factor in assessing the course of the economy." - Feb. 2007Sunday, March 31, 13
Timeline UBS shuts sub-prime lending unit and GMAC announces huge mortgage related losses – May 2007 Countrywide Financial (largest US mortgage lender) avoids bankruptcy by taking $11.5 Billion loan Freddie Mac posts $2 Billion Loss – Nov. 2007Sunday, March 31, 13
2008 Banks face losses of $900 Billion Jobs lost across the board across many industries Collapse of major Wall Street ﬁrms begins with Bear Stearns and continues thru to Lehman Brothers. Others? Global liquidity issues know no boundaries Credit? Whats that? Oil and commodities go thru the roof and then craterSunday, March 31, 13
Some Stats $16 Billion outﬂow from India in 2008 Inﬂation at 12% $291 Billion – Indian FX reserves as of 03 Oct. IndianOil Corp costs to rise 70% to $45 Billion Industrial growth plummets to 1.3% in August Sensex down ~50% in 2008 Sensex up ~50% from 2004Sunday, March 31, 13
Why Should I Care? Unprecedented growth from 2003 to 2007 Where did the growth come from? Credit! Foreign Investors (Wall St., Street ﬁrms, Hedge Funds, Banks, PE Funds, VC Funds) Increased buying power of consumers SENSEX goes from under 5,000 in early 2004 to a peak just above 21,000 in Jan. 2008 to 10,400 on Oct. 10th, 2008Sunday, March 31, 13
Indian Real Estate 10x growth in metro real-estate prices in 5 years Flipping! Aﬀordability for the average person? Can you get a (home|auto|personal) loan? Aﬀordability for the more privileged person? Can you get a (home|auto|personal) loan? Standard Charter and Citibank Refuse Loans to RE Developers – 09 Oct. 2008Sunday, March 31, 13
Retail Growth Big bets made on retail growth Malls! Malls! Malls! Whos buying at the malls? Whats selling now? High End Luxury Items Where to make (conservative) bets now? Where to get Rs. for expansion? Are further expansions warranted with slow retail growth?Sunday, March 31, 13
Startup Funding Indian Investors are getting even more skittish VC game is a long-term play Can VCs continue to provide returns attractive to their investors Can investors wait for the next exit window? VCs are advising portfolio companies to come up with revenues quickly and be prepared for a major dry spell Many VCs will quit and move to angel fundingSunday, March 31, 13
(Re)Sources BusinessWeek, What will the crisis mean for venture capital?, Sarah Lacy, 09 Oct. 2008 http://bit.ly/3A43xX Yahoo Finance Charts and Historical data Meltdown 2008, TerranceDC, Oct. 2008, http://bit.ly/4gRiwh Sequoia Capital Presentation to Portfolio Companies - http:// bit.ly/16F8WK Google RBI Website My Blog http://blog.pjain.meSunday, March 31, 13
PANKAJ JAIN | @PJAIN PJAIN [AT] TEKNATUS [DOT] COM The Financial Crisis and India BarCamp Delhi October 11th-12th, 2008Sunday, March 31, 13
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