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INDIA BUSINESS WORLD - September 1st - September 30th - 2008
INFRA COS CAN NOW BORROW $500 M VIA ECBS
COMPANIES developing infrastructure projects can now borrow more abroad. The government has relaxed external commercial borrowing (ECB) norms to allow infrastructure companies to borrow up to $500 million a year for rupee spending in India, a five-fold hike over the current limit of $100 million.
However, under the new norms, companies borrowing over $100 million will be able to repay the loan only after seven years. Put simply, the loan should have an average maturity of seven years to ensure only infrastructure companies with genuine long-term funding requirements access this window. Borrowing debt will also get easier, thanks to the easing of the interest cap on long-term funds beyond seven years. Borrowers can now tap such funds at higher interest rates—450 basis points above the six-month Libor.
Infrastructure companies are involved in sectors such as power, airport, road and ports. “The move will give flexibility to borrowers looking at long-term funds since interest rates in the country are high. Good projects and large companies should not have a problem accessing capital overseas even in the current scenario,” said PwC leader (infrastructure) Amrit Pandurangi.
The government had revised the ECB policy in May, when infra companies were allowed to raise up to $100 million for rupee expenditure. For other companies, the limit was set at $50 million. The policy has been revised in consultation with RBI, a finance ministry statement said. Before May, the cap was $20 million for all companies, including infrastructure players. The ceiling for other companies stays unchanged at $50 million.
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