India Inc goes on a dollar hunt

RIL, Essar, Adani have sounded bankers to raise funds abroad in the coming weeks

In a move that could indirectly help the government tackle its problem of a widening current account deficit, corporate India is planning to go on a fund-raising spree abroad over the next few weeks. The idea is to take advantage of a falling rupee and prepay high-cost rupee loans.

Indian companies have already raised a record $11.9 billion in foreign loans so far this year, compared with $4.3 billion in the same period last year.

Reliance Industries, Adani Enterprises, JSW Steel and Essar Steel are among the top Indian companies that have sounded their bankers to raise foreign-currency loans in the coming weeks. While Reliance is raising close to $1.75 billion, Essar Steel is raising $2 billion as pre-export finance. Adani plans to raise up to $2 billion, depending on appetite for its paper. JSW Steel said it wanted to raise $900 million to swap its rupee loans worth Rs 5,500 crore.

An Essar official said the company would use the proceeds to prepay its rupee debt as part of its plans to dollarise its entire local loans, worth $4 billion. The company had earlier raised $1 billion through the external-commercial-borrowing (ECB) route which helped it save Rs 450 crore. Paying off local loans with a $2-billion dollar kitty would help it save another Rs 1500 crore.

“The government should remove all restrictions on good Indian companies raising funds overseas,” says Ashutosh Agarwala, CFO & director (finance), Essar Steel. “There are too many restrictions, such as end use of funds and ceiling of interest rates, which are hindering indian companies from raising funds abroad,” he says.

Indian companies with natural forex hedge, such as export earnings, can raise funds from abroad and shave off four-five per cent of their finance costs, say bankers. The savings will come in spite of a rising forward cover. With the rupee falling, many Indian companies with good ratings are already looking at the option of raising foreign loans and, if necessary, selling equity, they add.

Reliance will refinance the $1.75-billion loan it had taken in 2008. Of this, $550 million will be used to fund its capital expenditure. The Mukesh Ambani-promoted company has undertaken one of India’s biggest capex programmes by planning to spend $30 billion over the next five years. It had raised $800 million earlier this year (see chart).