With approvals for capex-related activities on the rise over the last two months after a sluggish pace in May-November 2010, overseas borrowing by Indian corporates are also going up.
Approvals for external commercial borrowing (ECB) rose to $3.4 billion in December 2010 and have remained strong at $2.7 billion in January.
This includes loans taken out for imports of capital goods, modernisation, new projects and rupee expenditure on capital goods.
Part of this pick up has been led by telecom firms refinancing their rupee loans taken out to cover 3G spectrum fees.
However, approvals for borrowing by other infrastructure sectors (power and roads) have also risen. A sustained pick-up in the ECB would not only bode well for the stability of India? s balance of payments but also signals a turnaround in investment demand, said Sonal Verma of Nomura Securities. Around 35 companies raised over $1.93 billion through the automatic route, which does not require RBI or the government? s approval, for various projects, while around $773 million was raised by four firms under the approval route in January,according to RBI data.
State-run Hindustan Petroleum Corporation raised $400 million through External Commercial Borrowings (ECBs) for its modernisation project during the month.
Infrastructure firm SP Jammu Udhampur Highway Pvt Ltd raised $350 million via ECBs for its road projects.
Corporates, registered under the Companies Act, 1956, can access ECBs up to $500 million in a financial year, under the automatic route. The ECB, which is not covered by the automatic route, is considered under the approval route on a case-by-case basis by RBI.
ECBs are used as an additional source of funding by Indian corporates to augment resources available domestically.
Foreign Currency Convertible Bonds (FCCBs) are also governed by norms similar to ECBs.
Other major fund raising in January under the automatic route were done by telecom major Aircel which raised a total of $355 million in two tranches of ECBs for import of capital goods, while Dishnet Wireless raised $ 345 million.
Under the approval route, Rural Electrification Corporation raised $ 500 million for its lending purposes.