Public sector companies ahead of private peers in raising funds abroad
Taking advantage of nine-year low rates, Indian companies, including Oil India and Indian Oil, are set to raise about $5 billion in a few weeks as foreign currency loans, against $4.85 billion raised by Indian companies in the June quarter.
Most of the debt will be used for funding acquisitions abroad by government companies even as investments by private sector companies remain subdued.
Analysts said foreign loans have become cheaper mainly because not many private companies were going for foreign loans -- given the high volatility of rupee-dollar conversion rates.
“It may be noted that the low rates are only for AAA-rated government-owned companies and not for normal private companies, who are hardly interested to raise non-rupee debt,” said Prabal Banerjee, CFO of Bajaj Group.
“Such low demand has also contributed to lower level of spread in the loan market.
"This is also due to the fact not very many banks are offering much loans in market.
"The ECB (external commercial borrowings) volume has significantly dropped since last two years contributing to the moribund market scenario in the Indian ECB market, except for refinancing deals.”
Oil India, Indian Oil and Bharat Petroleum are raising funds to acquire 23.9 per cent stake in Russia’s Vancor field for $2 billion, bankers said.
Oil India is raising $650 million, while Bharat Petro Resources is raising close to $500 million.
Indian Oil and REC are raising $300 million and $150 million, respectively.
There is another tranche of $3.5 billion, which is in the pre-mandate stage, according to Bloomberg data.
But the status of the foreign loan market is exactly opposite to the bond market, where, bankers said, there is some demand from Indian private companies but good rates are not available.
“Bond market today is stronger than the loan market and there are sporadic surge in pricing in bond market,” said he.
Among the private sector companies, big boys like Reliance would get the benefit of lower rates due to its good rating, bankers said. Birla-owned Hindalco is also in the market to refinance part of its $5.3 billion of loans.
“There are a few private sector companies like Glenmark Pharmaceuticals that have appointed bankers to sell bonds but majority of fund-raising overseas even via bonds is by government companies,” said a banker. Power Finance, NTPC and National Highway Authority want to sell bonds to fund projects in India, he said.
Bankers said it was a cause of concern that private companies were not raising funds and were not investing in creating new capacities.
A CMIE study said projects under implementation by the private sector were at least 10 per cent lower than projects under implementation by the government.
The private companies announced projects worth Rs 11.33 lakh crore (Rs 11.33 trillion) during 2014-16 and, of this, only a third has gone for implementation.
Whereas of the Rs 7.4 lakh crore (Rs 7.4 trillion) new investments announced by the Modi government during the last two years, 60 per cent have already gone under implementation, the CMIE report added.
