Indo Gulf In Bid To Swap Forex Loan

Indo Gulf Fertilisers and Chemicals is trying to swap a part of a $60-million foreign currency loan into a rupee term loan. It is looking towards converting about $25 million out of the total amount. The company has begun negotiations with banks for ways for the loan conversion. The loan is priced at about 125 basis points over Libor.

With the rupee depreciating by about 15 per cent over the last six months, there has been a lot of speculation on where the Indian currency was headed. This has resulted in the forward premia also shooting up to a high of 22 per cent but presently ruling between seven-eight per cent. The rupee cost of the loan works out to about 16 per cent for the company. The idea is that if it can swap the loan for a rupee loan at a cheaper rate it can save on interest costs.

At the same time, banking sources say that they are scouting for companies with export commitments which need funds but cannot borrow overseas as they do not have the necessary brand image and hence have to borrow at a higher cost. Another factor could be that they are presently borrowing in rupee at rates above 18 per cent.