New Delhi: Raising funds from international markets has caught the fancy of companies in the developing countries, including India, as they mopped up $333 billion last year and the pace is likely to intensify, a recent World Bank study said.
“Private and state-owned corporations in developing countries have borrowed in international markets on an unprecedented scale in the past few years,” the World Bank report, which analyses ‘Globalisation of Corporate Finance in Developing Countries’, said.
The sum of $333 billion, a three-fold jump from $88 billion in 2002, was raised mainly through syndicated bank loans and international bond issuance.
Twenty middle-income countries accounted for most of the participation in international capital markets, with India, China, Brazil, Mexico and Russia grabbing the lion’s share.
“These countries account for 95 per cent of total bond issuance, 85 per cent of total bank borrowing and 95 per cent of total equity offerings by developing-country companies,” the report said.
Interestingly, the fund raising was despite the fact that the access to international capital markets is more challenging for emerging-market corporate entities than for emerging-market sovereigns because of greater market constraints, the World Bank said.
The pace of corporate globalisation in the developing world is likely to intensify in the medium term, subject to fluctuations in the business cycle and cyclical changes in global financial conditions, it added. MORE PTI DRR MBH CST SM
This trend of financial corporations raising capital in global markets is more evident particularly in the case of commercial banks from India, Kazakhstan, Russia and Turkey, which have been at the forefront of what appears to be a major foreign credit boom.
Banks tap international debt markets to fund their growing domestic loan portfolios and meet increasing capital adequacy requirements. In India, several leading banking institutions have lined up plans to raise funds in the current year.
For example, ICICI Bank has announced plans to raise $2 billion through bonds issue in the overseas markets this year. Country’s largest lender State Bank of India looks up to mop up about Rs 10,000 crore during 2007-08 in tranches. Other lenders such as Bank of India and Bank of Baroda have also plans to raise funds in international markets in the current year.
Over the past two years (2004-06), 20 Indian banks have borrowed a total of $8.2 billion from the international markets. Of which syndicated borrowing accounted for $6.63 billion, while the bond issuance cornered Rs1,580 crore in 2004-06, the world bank report showed.
Firms based in developing countries raised $156 billion through international offering of corporate debt and equity in 2006. About 422 emerging market companies have tapped international bond markets at least once since 2002, around 537 contracted bank loans on the international syndicated market and 360 raised capital on one of the global major overseas exchanges.