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India Inc likely to speed up foreign fund-raising plans

MUMBAI: Overseas borrowing by Indian Corporates is likely to accelerate with favourable and steady borrowing costs, supported by stable outlook for the rupee.

Adequacy indicators, such as import cover and short-term debt to reserves, remain the strongest in more than a decade - unlike for many EM peers.

Indian firms obtained ECB (External Commercial Borrowings) sanctions worth $ 3.5 billion or an estimated Rs 26,000 crore in April-June'2020, show latest RBI data. This is about one-third of the sum - $11.9 billion-they borrowed in the same period a year ago.

"Surging reserves and rising ammunition to keep the currency stable will provide corporates the optionality to look at foreign sources of financing, as borrowing costs overseas remain low,” said Rahul Bajoria, chief economist at Barclays India. "The rise in reserves is largely a reflection of a current account surplus augmenting capital inflows.”

US 10-year Treasury Bill, a global gauge for pricing bonds, yielded 0.68 percent versus 1.88 percent at the beginning of this year. This should bring borrowers’ funding costs lower unless the risk perception changes. During the same period, the six-month London Interbank Offer Rate (LIBOR), another international metric, dropped 162 basis points. A basis point is 0.01 percentage point.

The Reliance Group, the Adanis, and the Aditya Birla Group are among the largest companies to have borrowed overseas. Similarly, last-mile-lenders Shriram Transport Finance, Mahindra Finance, and IIFL also raised overseas credit.

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