India Inc takes to ECB, FCCB routes amid credit slump

India Inc takes to ECB, FCCB routes amid credit slump
The Financial Express, August 27, 2009, Page 13

fe Bureaus, Mumbai

The domestic credit offtake may be slipping but the Indian companies are raising funds heavily through external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) routes.

According to data on ECBs and FCCBs released by the Reserve Bank of India (RBI) on Wednesday, during July 2009, Indian corporates have raised a total of $ 2.01 billion as against $1.9 billion in June 2009, and $494 million in May 2009, through the ECB and FCCB route.

Suzlon Energy has been the only FCCB issuer for $ 90 million for the purpose of overseas acquisition for a maturity of five years. Vedanta Aluminium has been the largest ECB issuer for $500 million for rupee expenditure with a maturity period of five years and six months.

There are 46 deals done in July 2009 as against 50 in June 2009.

The budget estimates (BE) for 2009-10 on the resources raised by public enterprises by bonds, ECBs is also shown up by 12% at Rs 2,07,241 crore as against the revised estimates (RE) of Rs 1,83,949 crore for 2008-09.

The expenditure budget for 2009-10 depicts that BE for 2009-10 on the ECB side is nearly up 35% to Rs 16,440 crore as against Rs 12,191 crore in the RE for 2008-09.

In June 2009, Indian corporates raised a total of $1.9 billion through the ECB route as against $494 million in May 2009, thereby depicting more than a three-fold increase in the funds raised.

National Aviation Company of India Ltd has been the largest issuer of ECB bonds in June, through the approval route, to the tune of $830 million for the import of capital goods with a maturity period of five months.

In June 2008, $1.58 billion was raised through the ECB window. During July 2008, Indian companies raised $2.47 billion, through ECBs.

Experts say that since there has been an improvement in the liquidity conditions globally, the ECB market will now open up. More and more Indian banks and corporates will now rush in to raise funds through the ECB window, they say.