India Inc may put borrowing plans on hold as Greece fallout to boost costs

MUMBAI: Indian companies planning to borrow in overseas markets may put the option on back burner as investors are holding back investment amid worries from Greek voters' decision to reject the European Union (EU) plan to bailout the country, which has defaulted on payments. Borrowing costs are expected to spike, at least temporarily , as investors turn wary of buying corporate paper from emerging markets even as yields on some sovereign paper itself is expected to climb.

"For top rated Indian institutions (BBB-), the spread has already widened by 30-40 basis points compared with March level earlier," said Sidharth Rath, who serves as the president of Treasury & Business Banking at Axis Bank. "The risk premium has gone up due to global develop ments like Greece Investors are or Fed rate hike turning wary possibility ."

Investors are averse to taking risk at this point given that the situation in Europe remains fluid with some no clear view on whether Greece will stay in the Eurozone or leave it. paper itself is will stay in the expected to Eurozone, or leave it. If the EU sticks to its stance, then a Grexit will roil various markets although they remained calm on Monday expecting some kind of an agreement on how to proceed about the bailout that will keep Greece in the Eurozone.

In fact, the build up to this situation itself led to very few companies from India raising funds. In the past one month there has been no issue after Bharti Airtel raised $1 billion last month at 210 basis points over the 10-year US Treasuries at 4.37 per cent. A basis point is 0.01 percentage point.

Although not many companies have lined up a dollar bond sale, sources say that the $10-billion Adani group is in the process of raising $1-1.5 billion for its ports company.

India's sovereign rating is at BBB-, the lowest in investment grade. So any company with the same rating is treated as good investment bet among global investors.