India Inc goes for foreign loans with gusto

Indian corporates and banks have borrowed $4.2 billion from the overseas loan syndication market in calendar 2004 so far against $2.5 billion in the whole of 2003.

Analysts expect India Inc to raise between $5 billion and $5.5 billion in this calendar year from the overseas loan syndication market.

Among the ones which have raised loans overseas are Reliance Industries, Reliance Infocomm, Manglore Refinery and Petrochemicals, Indian Railway Corporation Finance Corporation, Bharti Cellular, GAIL India, Power Finance Corporation and Amtek Auto.

Reliance Industries, Reliance Infocomm and Reliance Energy together have borrowed $250 million each. Also Reliance Industries has refinanced a $500 million loan.

However, there has been a slowdown in the syndication market in the last few months as there are no more arbitrage opportunities and a number of corporates have already raised money.

Also RBI regulations have also hampered some non-banking finance companies from raising money abroad , said a co-chief opertating officer of a foreign bank.

Among domestic institutions, SBI, Vijaya Bank, IDBI Bank, ICICI Bank and and Union Bank of India have raised syndicated loans overseas in the first six months of the current fiscal.

SBI has raised $500 million, while ICICI Bank has raised around $400 million this year. A host of other banks such as HDFC bank, Canara Bank, UTI Bank, ING Vysya Bank have raised 1 to 3-year money from the overseas syndication market.

Sanjeet Kumar Singh, vice-president, ICICI Secutities said, "As US interest rates moved up and the dollar view has turned positive at the margins, there was a lull in external borrowings for 2-3 months in the middle of the year.

However, with the realisation that the rupee is unlikely to depreciate much against the dollar, there is a possibility that corporates may find such borrowings attractive, though this involves staying exposed to the exchange rate risk.

Generally otherwise, coporates targeting external funds are going to time the market whenever the cost of hedging both exchange rate and interest rate risks subsides in rest of the year."

"The Indian loan syndication market is very active. Indian borrowers include banks, corporate and government institutions. Syndicated loan deals by banks have been growing and they have raised around $2 billion in this calendar year.

Indian corporate demand for overseas funds has been growing because of the increasing amount of overseas investments by Indian companies and banks. Also Indian companies have started acquiring companies abroad," said Vipul Ambani, chairman and manging director, Tower Capital Securities.

"This will give rise to more acquisition financing. There is also an increasing demand for project and infrastructure finacing ," he said. An economic boom has also boosted investor confidence in India, slicing the risk premium on bonds issued by junk-grade Indian borrowers, which are now being priced at par with investment grade instruments.

In Asia-Pacific, Japan is the biggest borrower at $100 billion, followed by Australia at $25 billion, HongKong at $15 billion. China is way behind India with pure borrowing from Chinese companies at around $ 2.5 billion this year.