PSUs cold to ECBs, will hit govt plans to finance CAD

Aug 23 2013, 14:23 IST
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SummaryThe new window opened by the government for PSUs to raise ECBs for working capital needs is not likely to be used in a hurry.

already evaluating three offers. It was in 1996 that CIL had last mobilised overseas capital and that was foreign currency loans from multilateral agencies like the World Bank, not ECB.

The countrys largest power generator NTPC, which raised $750 million through ECB last fiscal, is open to raising more such funds for project financing. We will definitely look at raising ECB for project financing. But we do not borrow for working capital, NTPC director-finance AK Singhal said.

IOC director-finance PK Goyal said the company will make use of the new ECB window to raise $500 million through a syndicated loan by the end of August, which will be used for working capital needs. He added that that as per the new rules, they can raise about $750 million for capital expenditure and $1 billion for working capital requirements. Depending on tenure and size, interest rates on ECBs vary widely. In July, it had raised 10-year dollar-denominated bonds of $500 million at interest rate of 3.224 percentage points over US Treasuries. Previously, the countrys largest oil marketing company could raise working capital loans from abroad with a tenure of 1 year and now, the tenure has been extended to three years.

A few days ago, the government re-estimated the current account deficit for FY14 at $70 billion a figure many analysts feel is rather conservative and announced a few steps aimed at additional dollar inflows of $11 billion. Quasi-sovereign bonds of $4 billion, additional ECBs of another $4 billion and spurring NRI inflows through attractive interest rates were among these measures. FE had reported that IIFCL and IRFC are looking at raising $2.5 billion between them through overseas bonds. It is also learnt that Power Finance Corporation has sought a special waiver for it to borrow from overseas even at an all-inclusive cost higher than that of domestic loans. So, while the bond route does seem pragmatic, the ECB window doesnt as much.

(with inputs from Prashant Mukherjee)

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