FAC­ING DOL­LAR SQUEEZE, FIRMS RUSH FOR SAMU­RAI LOANS

Financial Chronicle - - FUNDAMENTALS, POLITICS - ANURAG JOSHI

IN­DIAN com­pa­nies lured by Ja­pan’s near-record low in­ter­est rates and eas­ier avail­abil­ity of funds are rais­ing the most yen-de­nom­i­nated loans in more than a decade as dol­lar lenders turn cau­tious.

While Samu­rai loans still make up only a small por­tion of In­dian firms’ to­tal for­eign-cur­rency fa­cil­i­ties, com­ing to more than 6 per cent this year, they are grow­ing in im­por­tance for bor­row­ers. Power Grid Corp and In­dian Rail­way Fi­nance Corp are seek­ing such debt, adding to $846 mil­lion worth of yen syn­di­cated loans raised by do­mes­tic com­pa­nies this year, peo­ple fa­mil­iar with the mat­ter said. That’s the most since the same pe­riod in 2006.

Highly rated In­dian firms are turn­ing to Samu­rai loans as over­seas banks be­come more re­luc­tant to ex­tend dol­lar funds amid im­pend­ing in­ter­est-rate hikes in the US and tur­bu­lence in Turkey and Ar­gentina. Most lenders in the South Asian na­tion, bat­tling the high­est bad-debt ra­tios since 2000, are also un­will­ing to make longer-tenor do­mes­tic loans.

Ru­ral Elec­tri­fi­ca­tion Corp signed a Samu­rai loan last month be­cause rais­ing yen and switching the funds to ru­pees was about 10 ba­sis points cheaper than swap­ping from dol­lars to the In­dian cur­rency, ac­cord­ing to Ajeet Agar­wal, fi­nance di­rec­tor at the lender.

“Given cheaper rates, more highly-rated cor­po­rates may tap that mar­ket,” Agar­wal said.RECL had raised a bi­lat­eral five-year yen loan equiv­a­lent to $92.5 mil­lion from Mit­subishi UFJ Fi­nan­cial Group Inc and swapped it into ru­pees, peo­ple fa­mil­iar with the mat­ter said. Av­er­age mar­gins on Samu­rai loans of In­dian firms are 73 ba­sis points this year, com­pared with 143 for dol­lar bor­row­ings, data compiled by Bloomberg show.

That’s helped Ja­panese cur­rency-de­nom­i­nated fa­cil­i­ties surge in 2018. The pro­por­tion of yen fa­cil­i­ties to to­tal for­eign-cur­rency loans of In­dian firms has risen to more than 6 per cent this year from over 4 per cent in 2017, ac­cord­ing to Bloomberg-compiled data. Dol­lar loans haven’t shown a sig­nif­i­cant pickup. Lo­cal bor­row­ers have raised a to­tal of $10.8 bil­lion so far in 2018, lower than the six-year av­er­age of $13 bil­lion, ac­cord­ing to Bloomberg. Yes Bank, a lo­cal pri­vate-sec­tor lender, raised $400 mil­lion from three-year fa­cil­ity which was un­der­writ­ten by a group of eight bookrun­ners, and joined by four banks in syn­di­ca­tion, it said.

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