Rupee Volatility Forces Ioc Shun Ecbs
The volatility in the rupee vis-a vis the dollar has forced Indian Oil Corporation (IOC) to reduce its dependence on external commercial borrowings (ECBs) and instead increase short-term rupee borrowings, IOC officials say.
IOC has been planning to reduce its dependence on foreign currency borrowings for some time now. The uncertainty surrounding the exchange rate has only precipitated this decision.
As most of its ECBs are short-term in nature, sudden movements in the exchange rate results in a revaluation of IOCs liabilities in rupee terms.
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IOC enjoys a short-term rupee borrowings limit of Rs 1,500 crore, of which it had utilised only around Rs 300 crore till a few months ago. This figure has more than doubled today.
On account of this, IOC has reduced its ECB borrowings, which were around $ 2.9 billion, by a few hundred million dollars during this period, the official added.
IOC would, however, continue to borrow FCNR(B) funds till the maximum limit of $600 million is reached. The company plans to increase the maturity of its FCNR(B) loan portfolio to about three years.
The government recently gave IOC permission to increase its ECB borrowings by $500 million, taking its total ECB limit to $3.4 billion. the $600 million limit for FCNR(B) loans is separate.
Meanwhile, IOC said it is not likely to go ahead with the swap deal proposed by the Reserve Bank of India, since apart from the State Bank of India (SBI) not many banks have expressed interest in participating in the deal.
The companys bond issue on a private placement basis, currently in the market, has not had much success due to the uncertain market conditions. IOC has extended the issue closing date to February 6.
IOC officials are hopeful of the Rs 15,000 crore petro bond issue, of which nearly half is due to it, crystallising later in the year.
The inflow of this amount will greatly increase IOCs ability to raise rupee funds.