Overseas fund raising by Indian companies dropped 12.4% on a month-on-month basis in August as risk aversion across the globe makes fund-raising challenging. India Inc borrowed $3.17 billion in August 2011 by way of external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs), over three times more the amount raised in August 2010, but lower than $4.17 billion raised in July 2011, said the latest ECB figures released by the Reserve Bank of India (RBI).
Though the corporates want to access overseas markets for funds due to high rates in the country, of late, international borrowings have become tougher as the cost of doing so has gone up due to the escalating European debt crisis.
? Both credit spread and liquidity spreads have risen and that has resulted into a 100-150 basis point increase in borrowings cost,? said a treasury head with a foreign bank. Over 75 companies raised over $2.68 billion through RBI’s automatic route, which doesn’t require any approvals. Another $1 billion were raised through the approval route. Auto major Tata Motors raised $500 million through ECBs for its rupee expenditure. State-owned Steel Authority of India (SAIL) mopped up a similar amount in two tranches through ECBs for modernisation. Some other large corporates who raised funds through the automatic routes include, Idea Cellular ($150 million); Bhushan Steel raised ($100 million) and Electrosteel Castings ($200 million). Under the approval route in August, national carrier Air India and private airline company Spice Jet raised raised $366 million and $270 million, respectively, for import of capital goods, while Rural Electrification Corporation (REC) raised $300 million.
In September, the central bank in consultation with the government hiked ECB limit for corporates. The limit under the automatic route per financial year was enhanced for corporates in real sector, industrial sector and infrastructure sector to $750 million or equivalent against the previous limit of $500 million.