Forex borrowings in India set to be lowest in 5 years

MUMBAI: Foreign currency borrowings by Indian companies are headed for the lowest in five years in the year to 31 March as global market volatility deters overseas fund raising. External commercial borrowings (ECBs) totalled $22.85 billion in the first 11 months of fiscal 2016, data from the Reserve Bank of India (RBI) show. The borrowings could be the lowest since fiscal 2010, when companies raised $20.37 billion through ECBs. Volatile global markets and a depressed investment cycle at home have prevented Indian companies from tapping offshore funds. Debt-laden firms preferred to borrow to retire old and costlier loans rather than invest.

For instance, in February, out of $1.35 billion raised, more than $350 million was towards refinancing of old forex loans and a mere $94 million was towards new projects. The February borrowing was down 40% from a year ago. Of the total borrowing in the month, $1.02 billion was raised through the automatic route and $330 million came through the approval route. Only one firm, Bharat Petroleum Corp. Ltd, raised the entire $330 million via the approval route and the proceeds were meant for refinancing an earlier loan. Under the automatic route, NTPC Ltd raised $500 million for power projects, Stelis Biopharma $47 million for a new project, JK Tyre and Industries Ltd and Sintex Industries Ltd $35 million each for modernization and Rain Industries Ltd $30 million for overseas acquisition. The build-up towards an interest rate hike by the US Federal Reserve that was announced in December 2014, and data indicating a worsening Chinese economic slowdown led investors to turn wary on emerging market debt last year.