India Inc raised $3.7 billion through external commercial borrowings (ECBs) in the month of August. The borrowings fell by $500 million from $4.2 billion during July, according to data released by the Reserve Bank of India (RBI).
A total of $2.7 billion was raised through the automatic route by 76 companies. The balance $1 billion was raised by way of the approval route, which requires case-by-case approval by the regulator. Under the automatic route, Tata Motors raised $500 million for investment in capital goods and Steel Authority of India Limited and Electrosteel Castings raised $500 million and $200 million respectively for modernisation.
On approval route, Air India and Rural Electrification Corporation raised $366 million and $300 million respectively. While Air India borrowed for importing capital goods, REC raised funds overseas for onward lending to power generating companies.
All the funds were raised through ECBs and no foreign currency convertible bonds were issued. The provisional number for outstanding ECBs for June stood at $93 billion.
The external commercial borrowings had shown a consistent increase till the last month, The ECBs for July stood at $4 billion as against $1.1 billion in the same month last year. However, a slowdown in overseas is expected due to the weak global economic scenario.
“Although there is considerable interest rate differential when companies borrow overseas, the ECBs are going to be less attractive in the near future due to rupee depreciation as it will increase the rupee liability. Also the slowdown seen in industrial growth in India would act as a speed breaker on borrowing in general which in turn will affect demand for ECBs, “ said Madan Sabnavis, chief economist at CARE.