India Inc may reduce overseas borrowing

Amid the sovereign debt crisis in euro zone economies, domestic companies are finding it difficult to raise money overseas. The risk of rupee depreciation and the lack of a natural hedge are other factors restricting corporates, Indian Overseas Bank CMD M Narendra said

Mumbai: Indian corporate houses are less likely to raise funds through the external commercial borrowing (ECB) route in coming days, despite the Reserve Bank of India (RBI) relaxing overseas borrowing norms, as Western banks are less willing to taking positions in emerging markets, reports PTI.

The falling rupee has reduced the appetite of corporates for ECBs, as they fear a higher repayment burden. ECBs are already in tight supply, with swap rates pegged at London Interbank Offered Rate (Libor) plus 4%.

RBI data shows that external commercial borrowings by Indian corporates dipped to $3.71 billion in August from $4.16 billion in the previous month.

The trend is in sharp contrast to the first quarter, when domestic firms borrowed $8 billion compared to $5.3 billion in the year-ago period, on the back of the low interest rates then prevailing in European economies.

“In the light of the lingering euro zone debt crisis, all European banks have less surpluses to lend to overseas corporate houses. Also, the spread has widened in the recent times, making fund-raising more expensive,” Indian Overseas Bank chairman and managing director M Narendra told PTI.

At present, the going rate for ECBs is the Libor—which is the international benchmark rate for loans—plus 4%.

Some experts feel that risk aversion is another factor that will lead to a decline in ECB borrowing.

“In uncertain environments, European banks are risk- averse. So, they are less likely to take exposures to corporates in emerging markets, making it difficult for Indian industry to raise money through foreign banks," Crisil chief economist Dharmakirti Joshi said.

He added that the recent relaxation of the ECB norms may help the situation to an extent. “The easing... will help in repayment of overseas borrowing obligations like foreign currency convertible bonds (FCCBs) and hordes of small savings that are due for redemption. But how it is going to help overseas borrowing will depend on the external environment, particularly in Europe.”

Another reason for the falling appetite for ECBs is the cash pile that leading corporates are sitting on.

“A lot of people have enough cash, so they are not in a borrowing mood,” Axis Bank president for corporate banking Nilesh Shah said.

Last month, the RBI increased the ECB limit under the automatic route by 50% to $750 million per year from $500 million earlier.

However, amid the sovereign debt crisis in euro zone economies, domestic companies are finding it difficult to raise money overseas.

The risk of rupee depreciation and the lack of a natural hedge are other factors restricting corporates, Mr Narendra added.

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SEBI shakes up key advisory panels

The panel restructuring drive is also being seen as part of a process that began with change in the top leadership position earlier this year

New Delhi: The Securities and Exchange Board of India (SEBI) has embarked on a restructuring drive for the various advisory panels that help it frame new regulations in different capital market segments, such as IPOs, mutual funds and secondary market trading, reports PTI.

The capital market regulator reconstituted its Primary Market Advisory Committee (PMAC) last week and is currently in the process of restructuring some of the other existing panels and might also look at setting up some new committees.

A senior official said that a few other panels have also been restructured in the recent past, partly due to certain vacancies that arose in the old panels and partly for bringing in a more diversified representation from various segments.

The official said that the panel restructuring drive is also being seen as part of a process that began with change in the top leadership position earlier this year.

UK Sinha took over as the new SEBI chairman in February this year, while there have also been many changes in senior positions like executive directors and SEBI whole-time members, as also that of the nominated members since then.

As many as six panels have been either constituted or restructured since Mr Sinha took over as SEBI chairman from his predecessor CB Bhave.

These include advisory panels on primary markets, mutual funds, secondary markets, corporate bonds and securitization, consent orders and compounding of offences and the SEBI Committee on Disclosures and Accounting Standards (SCODA).

The new Primary Market Advisory Committee would be chaired by TV Mohandas Pai, formerly with IT giant Infosys and currently chairman director at Manipal Universal Learning.

Besides the panel would have members from stock exchanges, investor associations, corporates and other financial institutions among others.

The panel would advise SEBI on issues related to regulation and development of primary market, on legal steps required to introduce simplification and transparency in systems and procedures and on regulation of intermediaries for ensuring investor protection.

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Cement sector may witness negative growth in October

“Given last year’s higher base and the upcoming festival season (Diwali), the cement industry is expected to report negative year-on-year growth in dispatches for the month of October 2011,” Elara Securities said in a report

New Delhi: The cement sector is likely to witness negative growth in sales in October due to a slowdown in infrastructure construction activities amid the festive season, besides the higher base in the corresponding month last year, reports PTI quoting a brokerage firm.

“Given last year’s higher base and the upcoming festival season (Diwali), the cement industry is expected to report negative year-on-year growth in dispatches for the month of October 2011,” Elara Securities said in a report.

In September, the country’s cement firms reported a marginal 1.4% decline in dispatches over the same month last year. In August, cement dispatches were down by 6.6% in comparison to July.

Industry sources said the unavailability of sand has impacted cement offtake in the western region, while the monsoon and the fluid political situation hit sales in Andhra Pradesh.

“As cement demand is still subdued, cement players have cut down supply in the low price non-trade segment. Thus, cement prices during the month increased in most parts of the northern, eastern, western and central regions by Rs5-Rs30 per 50kg bag,” it said.

Cement prices in the southern region (except Andhra Pradesh) remained flat, as cement demand was weak due to festivals like Onam and Dussehra. Prices in Andhra Pradesh have inched up by Rs10 per bag due to the Telangana agitation.

“Cement dealers expect prices to inch up further by Rs5-Rs10 per bag in most regions” Elara Securities said.

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