Though some companies which had initiated the process may go ahead with it, future requirements will surely be postponed.
The spike in uncertainty in international markets following a downgrade of US sovereign debt by rating agency Standard & Poor’s is expected to force Indian companies to put their foreign fundraising plans on the back burner.
Though some companies which had initiated the process may go ahead with it, future requirements will surely be postponed.
Take state-run Rural Electrification Corporation (REC), which has initiated roadshows for raising $300 million in the next 10-15 days.
The company will postpone the Swiss franc bond issue by two weeks due to the uncertainties, HD Khunteta, chairman, managing director and director (finance) of REC, told DNA.
Tata Chemicals, a Rs6,000 crore chemicals and fertilisers player, has also put its fundraising plans on hold. Last quarter, it had expressed its intention to raise up to $375 million in debt from markets overseas in view of high borrowing rates in the local market.
“We had planned a huge debt raising plan overseas to fund our expansion plans, but now, we will wait for an opportune time as the market conditions are not good,” said PK Ghose, chief financial officer, Tata Chemicals.
Even short-term borrowing plans are being deferred.
“We go for short-term working capital requirements like buyer’s credit etc. There we are taking a wait-and-watch approach for the time being,” said S K Joshi, director finance, Bharat Petroleum Corporation Ltd.
There is a lot of volatility and the picture is not clear, said Joshi, adding that the company will gauge the impact of the US downgrade and other global developments before firming up plans.
Ramesh Kumar, senior vice president (debt market), Asit C Mehta Investment Intermediates concurred. “Indian companies are not taking additional project risk due to uncertainty domestically as well as internationally. There are concerns like where the dollar is headed,” he said.
A London-based issue arranger said the cost of raising funds in the international market may turn a tad dearer following the S&P downgrade. “The current cost is LIBOR plus 500 basis points (all-inclusive) for an over five-year paper. If the liquidity condition is impacted, the pricing will go up from here. We will get a better idea about what is in store in a week or two. The pricing can go up by 50 basis points.”
A report released by Crisil on Monday said the global economic environment adds to corporate India’s challenges. “The primary impact will be on the availability and cost of funding, both domestic and international,” says Roopa Kudva, managing director & CEO, Crisil, wrote in the report.
The Crisil report also cautioned that an increase in global risk aversion will reduce appetite for emerging market risk and thereby affect the ability of Indian companies to raise money overseas.
Meanwhile, Tata Chemicals will press ahead with ongoing expansion plans despite the economic headwinds globally, managing director R Mukundan said. “We can sustain an Ebidta of over 17% in the next few quarters,” he said, adding that the company does not see demand for fertilisers slackening.
For the quarter ended June, Tata Chemicals’ consolidated net sales rose 17% to Rs2,953.95 crore, but net profit fell almost 7% to Rs199.87 crore, mainly on account of a `30 crore unrecognised subsidy income on raw materials.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}