Foreign borrowings lose charm with India Inc

Rising global interest rates have slowed down India Inc's overseas borrowing programme. According to the Reserve bank of India (RBI) data, corporates have mobilised $7.24 billion through ECBs during the first 11 months of calendar 2005 compared with $9.31 billion in 2004.

Analysts attributed the slide in money mobilisation abroad to the rising US Fed rate. The Fed rate in the last 18 months has risen by 325 basis points "" from 1 per cent in July 2004 and to 4.25 per cent in December 2005. One basis point is one hundredth of a percentage point.

Listed companies, however, raised funds through foreign currency convertible bonds (FCCBs) in 2005. In fact, FCCB mobilisation increased 87 per cent to Rs $4.59 billion in 2005 from $2.46 billion in 2004, while ECB borrowings of listed firms declined to $5.48 billion in 2005 from $6.60 billion in 2004.

The hardening of interest rates has affected even the borrowing plans of small and medium size unlisted firms. The unlisted firms mobilised $1.77 billion through ECBs in the 11 months of 2005 compared with $2.711 billion in 2004.

The greater part of ECB borrowings was made for refinancing of old debts. The listed and unlisted companies collectively borrowed $2.40 billion to refinance old debt. The listed companies mobilised $2 billion, while unlisted firms mobilised $ 400 million.

For expansion and modernisation plans, $ 1.88 billion was mobilised. Of this corpus, the listed companies borrowed $ 1 billion and the unlisted firms the remaining $880 million.

Mobilisation for new projects was third in the list with $1.47 billion being raise under this head. The unlisted firms have mobilised $871 million for project finance compared with $599 million by listed companies.

Finally, the corporate sector mobilised $1.319 billion for imports of capital goods with listed companies raising $1 billion and the unlisted firms $319 million.

Among the unlisted firms, Suzuki Powertrain India mobilised $ 138 million, Gateway Terminals India Pvt Ltd mobilised $164 million for project finance and Huawei Technologies India Pvt Ltd mobilised $100 million for the import of capital goods.

SLOWDOWN

Rising global interest rates have slowed down India Inc's overseas borrowing programme

FCCB mobilisation increased 87% to $4.59 bn in 2005 from $2.46 bn in 2004

ECB borrowings of listed firms declined to $5.48 bn in 2005 from $6.60 bn in 2004