S&P move to hit corporate borrowings, feels industry

Our Corporate Bureau

Mumbai, Nov 20: The affirmation of negative rating by Standard & Poor’s (S&P’s) to local currency of India may affect the sentiments of the foreign lenders. Industry experts felt that the corporate borrowings would also get affected.

Hindalco Industries Ltd joint-president (finance) AJS Jhala said that the corporate borrowing in India is currently very low, and it would get affected further. “As there is very little international borrowing that is taking place. As and when the rating is further downgraded, the spread on borrowing will increase,” said Mr Jhala.

He added that the government should do something to reduce the fiscal deficit and reduce non-plan expenditure. “Also tremendous efforts in tax collection will have to be made. The disinvestment process should also be expedited,” added Mr Jhala. Wockhardt chairman and managing director HF Khorakiwala cautioned, “It is high time the government puts its house in order by cutting down its revenue expenditure. The international rating agency is justified in their ratings since things have not changed over the past one year.”
Essar Oil Ltd managing director and CEO Jagdeesh M Mehta said that the negative rating will have an impact on the sentiments which would have a bearing on the industry. “There is every likehood that the borrowing rates would go up. The foreign lenders’ approach is going to be one of exerting extra caution. They would wait and watch for further rating before lending money. The other way would be that the foreign lenders would revise borrowing rates which would be loaded, taking into consideration the sentiments,” he added.

Birla Global Finance Ltd managing director SK Mitra said that since there is a negative bias, it is a matter of concern.