Money & Banking

India Inc’s monthly External Commercial Borrowing spikes in January

NARAYANAN V Chennai | Updated on March 11, 2020 Published on March 11, 2020

The spike in overseas borrowing is propelled by two big ticket borrowings worth $1 billion each by telecom major Bharti Airtel and EXIM Bank during the month

External Commercial Borrowings (ECB) of India Inc, on a year-on-year (y-o-y) basis, jumped more than 200 per cent to $7.8 billion in January. The spike in overseas borrowing is propelled by two big ticket borrowings worth $1 billion each by telecom major Bharti Airtel and Export-Import Bank Of India (EXIM Bank) during the month. In contrast, Indian corporates raised $2.4 billion during the same month last year.

The telecom major raised $1 billion through foreign currency convertible bonds (FCCBs) under the Reserve Bank of India’s (RBI) approval route. It may be recalled that the Airtel raised a total of $3 billion (around ₹21,250 crore) in January, primarily to meet its statutory obligations on adjusted gross revenues (AGR) payable to the telecom department.

The remaining $2 billion came via placement of equity shares under qualified institutional placement (QIP) route. The transactions were touted as the 'largest ever dual tranche equity and FCCB offering in the Asia-Pacific'.

In February, Airtel announced that it has paid its full and final AGR-linked dues of Rs 18,000 crore to the Department of Telecommunications (DoT) after its self-assessment. While the government's estimate of Airtel's AGR due stands upwards of Rs. 35,000 crore.

 

The other major borrower, EXIM Bank raised $1 billion by issuing a 10-year bond in the International Capital Market. The financial institution said the fundraising is for the purpose of supporting Indian project exports, overseas investment by way of long term credit and its lines of credit portfolio.

According to RBI data, Indian corporates collectively raised about $40.51 billion of overseas funding in the first 10 months of the current fiscal. The borrowing is tad lower than India Inc's historic high borrowing of $41.07 billion in FY19. Just to be sure, the monthly data released by RBI is based on approvals taken by companies. The final amount raised may differ marginally.

Tight liquidity in the domestic market and risk aversion in the debt capital market is pushing many Indian companies to tap overseas borrowing in the last two fiscal.

In its report titled ‘Bank credit and debt market trends’ published earlier this month, CARE Ratings said, the overall bank credit growth has been low so far this year with the first 10 months registering increase of 3.5 per cent compared with 7 per cent last year (January-March).

Financial services sector is the major borrower during the month with close to $2.8 billion borrowing followed by the ‘Electricity, gas, steam and air conditioning supply’ sector which raised about $2.3 billion. Telecommunications, under which Bharti Airtel is classified, is the third highest borrower with $1 billion.

The other major borrowers during the month includes Lalitpur Power Generation Company ($750 million), Power Finance Corporation ($750 million), NTPC Limited ($575 million). Future Retail and Shriram Transport Finance raised $500 million each.

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Published on March 11, 2020
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