 "India Inc goes slow on overseas loans")
Indian companies have raised $3.5 billion from overseas till date this calendar year, less than half of $7.2 billion they raised in the March quarter last year. The drastic fall in overseas loans suggests that Indian companies are not planning to increase capital expenditure anytime soon.
Experts said the decline in overseas loans is mainly because many Indian companies have burnt their fingers by borrowing foreign currency loans without taking forward cover for protection from forex volatility.
"After getting badly hit, the charm of forex loans for India Inc has come down significantly and not many CFOs are now thinking of tapping overseas markets," said Prabal Banerjee, president of the Bajaj Group.
Besides, the credit default swap of Indian companies has gone up substantially, deteriorating their credit quality. This is making forex lenders reluctant. "Another reason is that the condition of overseas lenders has turned so bad that they hardly have any appetite for exposure. They have very limited balance sheet strength to lend to corporates, particularly in the emerging markets. All the banks - American, European and Chinese - are now in the same rocky boat," Banerjee said.
"This situation will continue and we will find that overseas loans to India Inc will come down further in the coming quarters," he added. This, however, will not impact well-rated companies like Reliance and ICICI Bank. RIL refinanced an earlier loan of $1 billion this week while ICICI Bank raised $750 million from its Gulf-based branch.
Experts said amid tardy manufacturing and infrastructure growth, there is less demand for overseas funds. Despite Narendra Modi-led government's push for revival of manufacturing sector, most of the top companies have turned the tap off fresh capital expenditure. On March 11, the government announced that the industrial output for January fell for a third consecutive month by 1.5 per cent. Most corporate loans are being taken from local banks for working capital purposes, said an analyst.
"Companies have been waiting for clues from the Budget and will probably recast investment plans in the next fiscal. As interest rates are expected to come down, some companies are also deferring their plans, especially in the bond market where the rate gets fixed. In foreign markets, with rates moving up in the United States and the rupee being volatile, there is less enthusiasm. We would expect things to pick up second quarter FY17 onwards," said D R Dogra, MD & CEO of CARE Ratings. The Budget did not announced new incentives for the manufacturing sector and most CEOs said they would wait for some more time before taking call on fresh investments.
