ECB, FCCB approvals up 39%

ECB, FCCB approvals up 39%
The Financial Express, October 23, 2009, Page 13

fe Bureaus, Mumbai

The total approvals received by India Inc to raise capital through external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) rose 39% to $1.5 billion in September, up from $1.08 billion in August 2009, according to a data released by the Reserve Bank of India (RBI) on ECBs and FCCBs, on Thursday.

However, the approvals received by Indian corporates to raise funds in

September 2009 are significantly lower than $2.83 billion recorded in the corresponding period last year.

Indian corporates had received an approval to raise funds through the ECB and FCCB route worth $2.01 billion in July 2009 and $1.9 billion and $494 million June and May 2009, respectively.

Companies can raise $331.9 million through the automatic route and $1.17 billion through the approval route.

In September 2009, Indian Railway Finance Corporation has got an approval to raise $450 million for the purpose of rupee expenditure for a maturity of 5 years, followed by Tata Steel at $384 million for modernisation with a maturity period of 13 years and 2 months.

Experts noted that there is still sometime for the global markets to bounce back to normalcy. “There are a lot of projects, particularly in the infrastructure sector that are kept on hold, which will begin only after maybe six months from now, once liquidity starts pouring into global markets,” said a banking analyst.

DR Dogra, deputy managing director with Care Ratings said with interest rates expected to shoot up in the near future, owing to a spike in inflationary expectations and a high borrowing programme announced by the government, a lot of Indian companies will look at the option of going abroad to raise funds ar cheaper rates.

“Domestic banks are not lending to the corporates in a big way and credit growth is subdued for now. However, in the medium or long term, once the credit growth begins to rise, we will see interest rates heading northwards,” Dogra said. “With interest rates in the global markets still remaining on the lower side, we will see more and more Indian banks and coporates taking the ECB route, he added.