Foreign borrowings increase 156% to $1.8 billion in June

After a marked fall in May, external commercial borrowing (ECB) picked up in June primarily due to demands by telecom companies.

According to Reserve Bank of India (RBI) data, Indian companies avail off loans totalling $1.79 billion (about Rs 8,323 crore) from overseas lenders in June, up from $696.29 million in May. There were no foreign currency convertible bond (FCCB) issue during the month.

The largest borrower was Infotel Broadband Services Private Limited which raised $500 million though ECBs. Infotel Broadband was the only player to receive a pan-India license for Broadband Wireless Access (BWA) spectrum and was subsequently bought by Mukesh Ambani-led Reliance Industries.
 

NUMBER GAME DOLLAR FUNDS RAISED VIA ECB/FCCB
	2009	2010
April	298.63	2817.73
May	494.30	696.29
June	1919.04	1791.29
Total	2711.64	5305.31
Figures in $ million                                Source: RBI Data compiled by BS Research Bureau

Vodafone Essar and its group companies raised around $390 million through the ECB route. Other big borrowers include Essar Oil, which raised $300 million, and Adani Power which raised $150 million.

While borrowing from telecom companies pushed up the June figures, investment bankers said more corporates were likely to tap the ECB route in the coming months.

Fears of sovereign defaults in southern Europe had pushed up borrowing costs in the overseas debt markets, but credit spreads now appear to be recovering. According to bankers, a top-rated Indian corporate can now expect a spread of less than 200 basis points (bps) below the LIBOR. Slightly smaller corporates can now access overseas loans at 250-260 bps above LIBOR. Libor is the rate at which banks borrow funds from each other in the London interbank market and is one of the most widely used benchmarks globally for short-term interest rates. Most loans in the overseas capital markets are priced at Libor plus a risk premium, known as the credit spread.

“Pricing is becoming more and more attractive for Indian companies. A few months earlier, the market was only for top-rated Indian corporates, but now even smaller Indian companies can tap this route,” said a senior executive with a UK-based investment bank.