India Inc’s overseas borrowing gathered momentum in the current fiscal year amid a pickup in economic activity and continued availability of cheaper funds overseas.

According to Reserve Bank of India data, external commercial borrowings (ECBs) of India Inc in the first eight months of the current fiscal stood at $18.51 billion against $16.56 billion during the same period of FY21.

In the wake of the second wave of the Covid-19 pandemic, ECB had plunged to $700 million in May 2021, the lowest in two-and-half years. A gloomy demand outlook and excess capacity had forced domestic firms to stave off expansion plans and hence the fundraising. ECB started to pick up from July. However, the overseas fundraising is still lower than $30.69 billion Indian corporates raised in April-November FY20, the year when India Inc’s offshore borrowings touched a historic high of $52 billion.

Tapping overseas markets

“During June-September, many corporates were seen tapping the overseas market for funds. The low interest rates in the global markets had prompted many corporates to raise funds from these markets to meet their business needs (for working capital, modernisation, new projects, imports of capital goods and on-lending) as also for refinancing their existing domestic and foreign debt,” CARE Ratings said.

“The subsequent hardening of bond yields with the tightening of monetary policy/expectation as well as the depreciation in the rupee led to corporates limiting their overseas fund raising,” it added.

The lower ECB volume in the current fiscal, as compared to FY20, can also be attributed to the surplus credit availability in the domestic market. In his post Monetary Policy press conference earlier this month, RBI Governor Shaktikanta Das said there has been considerable improvement in the flow of resources to the commercial sector. “Whether it is bank credit or market-related credit instruments such as, debentures, commercial paper and ECB (in last year) there has been an improvement in the flow of credit to the commercial sector. And flow of bank credit itself has shown progress,” he said.

JSW Steel was the top borrower during the period, raising $1.18 billion followed by ONGC Videsh ($1.10 billion) and REC Limited ($1.075 billion). On a sectoral basis, electricity and gas supply players tapped the maximum offshore funding of $5.12 billion followed by the financial services sector ($3.51 billion) and basic metal manufacturers ($1.45 billion).