Tumultuous year raises India Inc’s dependence on foreign banks

Local firms are growing more dependent on banks to raise offshore funds going into 2019 as the bond markets sputter, rupee funding from domestic banks falls

130 bps more – average margins on Indian five-year foreign-currency loans over Libor in 2018

109 bps – rise in spreads over Treasuries for dollar bonds of local issuers  

115 bps – over Libor State Bank of India is paying for its $500 million five-year loan

$210 billion – distress assets limit India’s banks capacity to lend 

10 bps – More SBI is paying over its similar-tenor facility in 2017

100 bps – margin IOC is offering on a $1.3 bn 5-yr loan

BORROWING TRENDS

• Many issuers are looking at offshore loans due to low liquidity in the rupee debt markets
   
• Borrowers find offshore loans easier to raise funds, even though pricing is up
   
• Loan costs are heading up, but had fallen so much earlier that they are still lower 
   
• The political uncertainty and risks for volatility in the rupee are reasons for rise in pricing