Oil firms' borrowings up 100% already this fiscal

Oil companies' borrowings in the current financial year have already increased by a whopping 100 per cent-plus from Rs 30,000 in the the whole of 2004-05.

The overseas borrowings by oil companies so far include refinancing of existing foreign currency debt. Fresh borrowing in 2005-06 so far have risen 30-40 per cent over 2004-05, investment bankers said.

With crude oil prices touching new peaks by the day, oil companies are finding it increasingly difficult to bridge resources mismatches. Consequently, they are on a scramble to tap overseas resources, besides pursuing domestic avenues.

The general view among bankers is that even if the government allows hike in oil prices, greater requirements of resources by oil companies may not ebb.

Indian Oil Corporation's (IOC) brrowings alone have shot up to Rs 19,000 crore in the current year so far, which is higher than Rs 17,500 crore the company borrowed during the entire 2004-05.

Oil companies are also enticed to borrow abroad, with the cost of borrowings having gone down. The margins over libor have plummeted 50-60 per cent since last year.

Currently, the margin is in the range of 25-60 basis points over the libor. One-year libor now is 4.27 per cent.

Brijesh Mehra, managing director and head - global clients in India, ABN Amro Bank, said, "The underlying reason for increased borrowings is the drastic fall in spreads for Indian companies in the international market. On the whole, it is a good time for corporates to borrow by availing of these compressed spreads."

Bankers said borrowings have increased for various reasons. On the one hand, oil producing companies like ONGC have borrowed to fund their oil procurement needs, while oil marketing companies like IOC are borrowing to offset cash losses and seek new sources of funds.

These companies, on an average, are losing Rs 150 crore per month. Oil companies are expected to suffer an aggregate revenue loss of around Rs 40,000 crore in 2005-06.