K Ram Kumar

India Inc raised 53 per cent more resources via external commercial borrowings (ECBs) in the first half of the financial year vis-a-vis the year-ago period, with non-banking finance companies (NBFCs) among the prominent fund-raisers.

NBFCs made a beeline for overseas funding after domestic banks turned conservative in lending to them in the wake of the debt default crisis at IL&FS.

In the April to September 2019 period, Indian companies mopped up $25.16 billion through the ECB route, against $16.48 billion in the April-September 2018 period, according to Reserve Bank of India data.

The NBFCs that tapped the ECB route in one or more tranches during the reporting period include Shriram Transport Finance Company, India Infoline Finance Ltd, Piramal Capital and Housing Finance, and L&T Finance ($750 million each), Bajaj Finance ($575 million), ECL Finance ($500 million), Indiabulls Housing Finance ($350 million), and HDB Financial Services ($300 million).

The other large NBFCs that raised resources via ECB were Cholamandalam Investment and Finance Company ($272 million), Tata Capital Financial Services, Tata Motors Finance and Fullerton India Credit ($250 million each), and HDFC ($200 million).

PNB Housing Finance, Aditya Birla Housing Finance, and Aditya Birla Finance raised $100 million each.

Among the specialised NBFCs that raised resources were Power Finance Corporation ($2 billion) and Indian Railway Finance Corporation ($1.05 billion).

ECBs are commercial loans raised by eligible resident entities from recognised non-resident entities, and have to conform to parameters such as minimum maturity, permitted and non-permitted end-uses, and maximum all-in-cost ceiling. “NBFCs are squeezed in terms of bank credit and commercial papers, and have limited access to bond markets. So, they must be borrowing more from the ECB route.

Also, companies that were earlier borrowing from NBFCs, probably prefer the ECB market.

“Interest rates are going down globally. Rupee is fairly stable. So, ECBs are cheaper than domestic borrowing,” said Madan Sabnavis, Chief Economist, CARE Ratings.

Besides NBFCs, the other big fund-raisers during the first half include Adani Ports and Special Economic Zone Pvt Ltd ($1.40 billion), JSW Steel ($610 million), Reliance Jio Infocomm ($748 million), Dhamra LNG Terminal Pvt Ltd ($600 million), Tata Steel ($525 million), Tata Sons Pvt Ltd ($500 million), Reliance Industries Ltd ($313 million), and Indian Oil Corporation ($300 million).

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