India Inc Borrows Around $4.5b During Jan-Feb Period

Taking advantage of lower interest rates in the global money market, India Inc borrowed close to $4.5 billion to fund domestic business between January and February this year. This is 18% higher than the year-ago period. Total borrowings from April 2006 to February 2007 was $18.5 billion. With the government allowing a greater access to foreign borrowings, more and more corporates have been availing the ''automatic route'' to raise cheaper money. A local firm is permitted to borrow up to $500 million a year through the automatic route without any prior approval from authorities. Debt funds to corporate India have come in as foreign loans (better known as external commercial borrowings) and foreign currency convertible bonds (FCCB) that can be converted into shares. Companies raised $1.3 billion and $3.2 billion, respectively, in January and February, according to the latest figures released by the Reserve Bank of India. Successive rate hikes and money supply squeeze by RBI have deepened the trend. Bulk of the money in February was raised through FCCBs by Reliance Communications, which raised $1 billion. FCCBs, which fetch a premium, are preferred to plain vanilla loans when the stock market is on a roll.