The Hindu Business Line : `Better access to credit at finer rates possible'

Rosy picture
Companies will have other routes to access capital.
More money could flow into capital market.
Growth story sustainable, outlook positive

MR ROMESH SOBTI

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Mumbai Jan. 30 Indian corporates will be able to raise funds at better rates overseas with rating agency S&P upgrading India's sovereign rating to investment grade, according to analysts.

According to bankers, though the sovereign rating was not a constraint for blue chip Indian companies accessing funds abroad, the move will help budding corporates.

"The bulk of the emerging corporates (in the mid market segment) will be able to raise funds at finer rates.

Financing a 10 per cent plus growth rate will not be an issue for the next few years," said Mr Romesh Sobti, Country Executive, India and Head Sub Continent - UAE, ABN Amro Bank.

Other routes

Improvement in the country's sovereign rating also means that companies will have other routes to access capital. Ms Sarika Lohra, Banking analyst Analyst, Angel Broking agrees.

"Globally, Indian corporates will now have higher credibility when it comes to repaying loans. Their access to various international markets will increase. This will build up confidence and boost investments in India," she said.

For the country's burgeoning capital market, the upgrade implies more FII investment. "Large institutional investors are under invested in India. With the upgradation of ratings, more money will pour in our markets as Indian companies are seeing a high growth rate," said Mr Rashesh Shah, CEO, Edelweiss Capital.

Analysts say the Indian growth story is sustainable. S&P predicts that the GDP trend growth is likely to average more than 7.5 per cent in the medium term. "Though India's growth rate looks sustainable, if there is any minor correction it would not impact the ratings," said Mr P. Mukherjee, Senior Vice-President-Treasury, UTI Bank.

Sustainable growth

"Our economic growth can be sustainable for the next year, but continued growth would depend on inflationary pressure. For the long term, the economy is poised to do well. However, there can be a slowdown on a cyclical basis as there have been constant rate hikes to curb inflation," said Mr A. Prassanna, Chief Economist, ICICI Securities.

According to Dr Rupa Rege Nitsure, Chief Economist, Bank of Baroda, the outlook for the Indian economy is positive. "The rupee is on an appreciating mode and FII inflows will continue to bolster the capital markets. India's industrial production has also reached the highest in 10 years during November and the outlook for India looks positive," she said.

"Fiscal compliance has improved. The last budget had targeted a fiscal deficit to GDP ratio of 3.8 per cent and the country is likely to end the fiscal at 3.6 per cent," she added.

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