Several foreign lenders engaged in raising overseas loans and bonds for Indian companies have sought clarity from the central bank on whether the relaxed rules on higher offshore borrowing will apply only to globally higher rated firms. Such a criterion threatens to limit the number of potential beneficiaries, said people familiar with the matter.
Companies rated high domestically may not always make the investment-grade cut when rated by overseas agencies. Hence, bankers want to know whether the central bank’s reference to rating for eligibility to avail the latest plans applies to the domestic context or even overseas.
A top rated company globally can price bonds or loans with a spread in the range of 100-200 basis points depending on its brand, said dealers. However, a company rated high-yield by overseas rating agencies needs to offer much higher to draw global banks/investors. One basis point is 0.01 percentage point.
“The latest relaxation makes sense particularly for companies rated in the high-yield category by global rating companies,” one of the persons cited above told ET.
On Wednesday, the Reserve Bank of India (RBI) doubled a local company's borrowing limit to $1.5 billion via the External Commercial Borrowing (ECB) mechanism under the automatic route.
Source Name:- Economic Times