India Inc raises 29% more through ECBs, FCCBs in May

Indian companies raised $2.65 billion through external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) in May — a rise of $590 million, or 28.6 per cent, over $2.06 billion in April.

According to the Reserve Bank of India (RBI) data, of the $2.65 billion, around $1.49 billion was raised by 70 companies through the automatic route. The remaining $1.15 billion was raised through the approval route, which requires case-by-case clearance from RBI.

Hospira Healthcare India raised $250 million through ECBs for importing equipment and ERA Infra Engineering raised $220 million through FCCBs for overseas acquisition through the automatic route.

Through the approval route, Tata Teleservices and Tata Teleservices (Maharashtra) raised $400 million and $350 million, respectively, through ECBs, to refinance the 3G spectrum fee loan. Idea Cellular, part of Aditya Birla group, raised $120 million through ECBs to retire old loans used to pay spectrum fee. Under the automatic route, Indian companies are permitted to raise up to $500 million through ECBs in a financial year.

All other ECBs have to come from the approval route.

Issuance of ECBs and FCCBs is likely to go up in coming months, as RBI has allowed companies to raise funds through this route to redeem outstanding FCCBs.

It has also given extension of nine months to buy back in case of FCCBs where approval is required to support mid-sized and small companies that have been struggling to redeem bonds.

The decision comes against the backdrop of the Financial Stability Report, which has cautioned that many companies that have borrowed massively through FCCBs between 2005 and 2008 may not be able to convert the bonds into shares, as their share value has eroded.