Mumbai: Overseas borrowings by corporates are likely to turn upbeat in the months to come in the wake of government easing the curbs on fund raising abroad and prevailing high interest rates on domestic loans.
According to figures released by the Reserve Bank, the total overseas borrowing of Indian companies went down to $1.16 billion and $1.29 billion in April and May respectively from $4.4 billion in March.
The release further stated that in April as many as 25 firms raised funds via external commercial borrowings (ECB) and foreign currency convertible bonds (FCCB), while in May 30 companies raised money through these two routes.
Among the major borrowers in April, Petronet LNG raised $200 million for rupee expenditure and import of capital goods, while Reliance Communications raised $250 million for import of capital goods. Further, Reliance Pharmaceuticals raised $180 million for shipment of capital goods.
In May, Jet Airways (India) raised $287 million for financial lease and import of capital goods.
In the month of February, the overseas borrowing had declined to less than $1 billion, though six companies during the month raised money from abroad for acquisitions.
However, in March the ECB rose to $4.4 billion with corporate biggies like Reliance Communications, Adani Power, Tata Group and Essar Oil borrowing massively for various purposes like import of capital goods etc.
The government relaxed ECB curbs particularly for infrastructure companies towards May-end. Earlier, companies were allowed to bring up to $20 million raised abroad for rupee expenditure. This limit has been enhanced to $100 million for infrastructure companies and $50 million for others.
Moreover, India Inc would find ECB route attractive following banks hiking their lending rates after RBI’s move to tighten money supply to tame the rising inflation.
Current benchmark prime lending rates of Indian banks are ruling at an average of around 13 per cent.
Providing further flexibility to firms, the government has raised the ceiling for ECBs of maturity of 3-5 years from 150 basis points to 200 basis points above six-month Libor and for 5 year tenor, the same has been increased from 250 to 350 basis points over Libor.