Corporates To Raise $1bn Offshore Debt

Leading companies are seeking to raise long term debt of more than $1 billion after the government liberalised access to global debt markets this month, merchant bankers said.

"Several applications have been made to the finance ministry," said the manager (corporate finance) at a Bombay bank .

Merchant bankers said applications were made by power firm Tata Electric (which plans to raise $300 million), engineering firm Larsen & Toubro ($150 million), state-run Power Finance Corporation ($100 million), and truck maker Telco, aiming at $200 million.

These blue-chip firms plan to raise the funds repayable in 10 years or more after a recent government decision that loans of 10-year maturity would not be subject to an annual ceiling on external commercial borrowings , bankers said.

 

L&T confirmed its application. "We have made an application to the finance ministry for an international debt offering of about $150 million," Larsen & Toubro's senior vice president (finance) Yeshwant Deosthalee said.

"We will use it essentially for infrastructure purposes."

Deosthalee said the funds will be used for capital expenditure and for buying equity in build, own and operate (BOO) infrastructure projects the company planned to undertake.

Other firms were not immediately available for comment. (Reuter)

he freeing of loans of 10-year maturity from an annual ceiling on external commercial borrowings was recommended by the Tarapore panel's report that mapped out a path to making the rupee convertible on the capital account in three years.

The attraction of cheaper offshore funds is fast spreading among medium and smaller companies, analysts said. A strong and stable rupee is tempting Indian firms to go for external commercial borrowings, they said. The rupee has been steady against the dollar for the whole of the last year.

State-run Indian banks such as the Bank of Baroda and Bank of India, which have sizeable foreign currency deposits, have reported a sharp spurt in ECB applications by firms. Bombay-based merchant bank Nucleus Securities is helping medium and small firms access offshore funds, an official said.

"We help them syndicate loans through foreign banks," said Vinod Kumar, assistant manager (merchant banking) at Nucleus. Companies with export earnings are good candidates, he said. Bankers estimate that external commercial borrowings this year will exceed last year's achievement of close to $8.0 billion. --- Reuter