The Centre's decision to tighten overseas borrowing norms has blocked close to $3 billion worth of proposals entailing external commercial borrowings and foreign currency convertible bond.
While the finance ministry has rejected proposals worth close to $1.5 billion another $1.5 billion worth of plans have been put on hold by corporates. "These companies have not given any mandate to bankers for raising funds but they were making presentations for raising cheap foreign currency," said an investment banker.
A string of public sector undertakings including Power Finance Corporation, National Thermal Power Corporation, Indian Railway Finance Corporation, Indian Oil and a few others. All these firms were planning to borrow between $150 million and $250 million each.
However, their plans were on the drawing board and they did not approach the ministry with concrete proposals.
Housing finance major Housing Development and Finance Corporation and a few blue-chip corporates too were planning to raise ECBs.
The finance ministry has reportedly rejected ECB plans for Nabard, Petrocon India, Dynamic Logistics, Gauri Baidyanath Trust and Dewan Rubbers.
These companies were planning to raise between $100 million and $300 million each from the overseas markets.
Essar Steel, Ispat Industries and Jindal Iron & Steel Company's plan to collectively raise $650 million ECBs has also run into rough weather. The plan was to raise directly from overseas on the strength of guarantees being given by banks and institutions.
The new government norms do not allow banks and financial institutions to stand guarantee to steel companies. The steel companies had planned ECBs to refinance their high-cost rupee loans. While Ispat and Jisco were looking at raising $225 million each, Essar was planning to raise $200 million through the ECB route.
However, banks and institutions are allowed to raise ECB on their own to be on lent to the steel companies. Industrial Development Bank of India (ECB) is planning to raise a high ticket $500 million ECB for these steel companies.
Exim Bank, Punjab National Bank and Bharati Cellular too are planning to raise cheap money through this route. Their proposals have been lying with the finance ministry.
Last month, the finance ministry clamped down on external commercial borrowings by imposing end-use restrictions on all loans over $50 million, reducing the interest rate spread, making it mandatory to park unused proceeds abroad, and making it compulsory for borrowers to hedge green-channel foreign loans.
