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The uncertain global economic scenario, a shortage of dollar supply and currency depreciation saw Indian companies raising less funds overseas in November than in the previous months. And these factors could also impact overseas future borrowing, say analysts.
According to Reserve Bank of India data, Indian companies raised a total of $1.58 billion through external commercial borrowings (ECB) and foreign currency convertible bonds (FCCB) in November, against $2.47 billion in October. The ECB/FCCB flow for September was $2.36 billion, while for August it was $3.70 billion.
Some of the companies that raised funds through the automatic route were IDFC, which raised $100 million for five years for onward lending.
Tata Teleservices raised $200 million for over six years for import of capital goods, and ONGC Mangalore Petrochem, which raised $250 million over nine months for new projects.
Under the approval route Dredging Corporation of India raised $158 million over 11 months. According to Dr Samiran Chakraborty, Regional Head of Research, Standard Chartered Bank, India, monthly ECB data is typically volatile and often there are month-on-month variations, which cannot be pinned on any macro factors.
“Going by whatever we have seen earlier, it is possible that overseas borrowings by Indian companies could slow down, despite the relaxations allowed by the RBI,” he said.
Weaker demand
In November, the RBI had enhanced the all-in-cost ceiling for overseas loans by 50 basis points, allowing Indian corporates more leeway to raise money overseas.
“A decline in ECB and FCCB numbers could be largely attributed to the difficulties corporates face while raising funds overseas as Euro debt-related turmoil pushes European banks towards excessive de-leveraging” said Ms Upasana Bhardwaj, Economist, ING Vysya Bank.
Overseas borrowing by companies may continue to be sluggish for the next two to three months, as there is hardly any demand for long-term funds, said Mr Avinash Gupta, Leader, Financial Advisory, Deloitte India.
“We are not seeing any pick up in demand. Also, due to the dollar crunch, only very good corporates are getting dollar loans,” Mr Gupta said.
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