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Indian companies borrowed $28.8 billion (₹1.86 lakh crore) through External Commercial Borrowings (ECBs) in 2017-18.
A report from CARE Ratings expects the borrowings to be around the same level or maybe slightly lower in 2018-19 on account of rising interest rates in the West and a more volatile rupee. With the banking system in India under pressure, large companies may continue to access this market and provide a countervailing force, the report said. CARE expects ECBs to be between $25 and $30 billion in FY19.
ECBs had touched a high of $33 billion in 2013-14 but since then went on a downward trend till 2016-17 before reversing in 2017-18 when it went up by 26.5 per cent. CARE noted that ECBs accounted for 31 per cent of the funds raised through corporate bonds (₹6.04 lakh crore). Companies choose to raise funds by tapping either the corporate bond market or ECBs depending on interest rate levels, currency movements and cost of hedging.
CARE noted that about a third of the ECBs were used for refinancing earlier borrowings, while 18 per cent was used for on-lending (by lenders/banks). Ports, power and railway projects consumed 9 per cent. The study said that the most popular tenor was the two2-five-year category in which 43 per cent of the money was raised, while 25 per cent of the money came in the 5-10-year category.
CARE said that the top 13 borrowers raised $15 billion accounting for 58 per cent of the borrowings. Despite the norms being liberalised, the number of borrowers through the ECB route remains limited, as not all companies are in a position to raise money on advantageous terms, the study noted.
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