Exim Bank to step up overseas M&A funding

Export Import Bank of India (Exim Bank) plans to step up its funding support to corporates, especially small and medium enterprises (SMEs), for overseas mergers and acquisitions (M&As).

Besides normal export funding, the bank has increased funding M&As by Indian corporates, especially SMEs. The total M&A funding in FY07 was over Rs 1,700 crore and total outstanding exposure was about Rs 3,500 crore. This will be one of focus area for the bank in 2007-08, executive director S R Rao said.

The bank prefers approach to nurture long-term relations with clients and SMEs, many of whom already use trade credit facility, are now expanding business activity through overseas investment part of which is used for acquiring units, Rao said.

The overseas M&A action has grown substantially from the middle of this decade. The outbound foreign direct investment for setting up units, expansion as well as M&As has more than doubled from $5.8 billion in 2003 to $12.96 billion in 2006.

State Bank of India, ICICI Bank, Bank of Baroda and Bank of India, which have a sizable overseas network, have already scaled up acquisition funding activity.

The wholly owned government entity will raise Rs 13,000 crore in 2007-08 to support trade finance, including term loans and funding to overseas M&As. Of this, about Rs 6,000 crore will be in foreign currency through instruments such as Samurai bonds and Rs 7,000 crore in Indian rupees, chairman and managing director T C Venkat Subramanian said.

Last year, the bank raised Rs 10,621 crore, including Rs 6,461 crore in rupee resources and foreign currency resources of $957 million.

"We will use medium term notes programme of $1 billion to raise funds through 5- and 10-year bonds, he said.The bank posted 10.6 per cent rise in its net profit at Rs 299.4 crore for the year ending March 2007 over Rs 270.7 crore in 2005-06. It will pay Rs 95.62 crore as dividend for 2006-07 to the government.

Its loan assets rose by 29 per cent to Rs 23,274 crore from Rs 18,028 crore in 2005-06. Approvals and disbursements stood at Rs 26,762 crore (Rs 20,489 crore in 2005-06) and Rs 22,076 crore (Rs 15,039 crore), Subramanian said.