Sicom Ltd, Maharashtras state industrial development corporation, has started offering foreign exchange loans to its industrial clients. The funds are being raised via lines of credit from foreign banks.
Sicom is the first state industrial development corporation (SIDC) to do so. As of now Sicom has granted in principle sanctions amounting to $16 million to at least four corporates.
Sicom received clearance to start the facility a few months ago from the finance ministry and the Reserve Bank of India. While it has so far committed $16 million, $6 million has been sanctioned. Disbursements will commence shortly on compliance by the borrowers.
The funds are being raised via lines of credit in US dollars. Sicom has recently acquired two such lines of credit -- from Dresdner Bank, Singapore and Sakura Bank, Japan -- both for $3 million each. The deals were struck via the banks representative offices in Mumbai.
The Dresdner LoC has a time frame of four years and the Sakura Bank LoC has a time frame of five years. The loans have been priced above the libor rate.
According to Sicom officials, the SIDC was able to raise the funds at a competitive margin. These funds are being lent out for tenures matching that of the LoC and are basically long-term loans. The spread to Sicom is approximately 150 basis points over the borrowing cost. Moreover, Sicom does not bear the exchange rate risk which will be borne by the borrower.
Sicom has targetted disbursals at around $30 million for this financial year. It is presently negotiating with several other foreign banks and is planning to raise a another $25 million via the LoC route. If the scheme is successful, Sicom is considering conducting it on an ongoing basis.
The amount committed in principle is $ 16 million. Formal sanctions are around $ 6 million which will be disbursed after completion of compliance. The organisations which have availed of this facility are Indocount Industries, Jaysynth Dyes and Chemicals, Conick Alloys, and K Bowett and Co.
According to Sicom officials, SIDC decided to offer the product as they felt there was good demand for it in the market. However, Sicom is being conservative with regard to disbursement. Being an SIDC, all disbursements are in the nature of industrial loans.
