Services cos allowed to raise $100 mn abroad
Corporate houses in the services sector such as hotels, hospitals and software companies can now raise low-cost funds abroad. Biz week in pics | Weekend Platter
By TNN |
NEW DELHI: Corporate houses in the services sector such as hotels, hospitals and software companies can now raise low-cost funds abroad for importing capital goods. In a move to help these companies, which account for nearly half of the total value of the country���s economic output, the government on Saturday decided to let them borrow up to $100 million from abroad. This borrowing window is available only for capital expenditure abroad.
Borrowers have to necessarily take the Reserve Bank of India���s (RBI) approval. Borrowing under the automatic route, a facility available to infrastructure companies and companies other than banks, however, has not been extended to the service sector companies.
Industrial and infrastructure companies are allowed to borrow abroad for overseas direct investment in joint venture and wholly-owned subsidiaries too. This end-use of debt raised abroad is also not allowed for services sector as per the finance ministry statement issued on Saturday.
The government now recognises that as in the case of industrial sector, the services sector should also be allowed to borrow abroad to meet the needs of an economy racing at 9% a year and predicted to grow at 8.5% this fiscal.
���Hospitality, healthcare and IT are fast growing sectors. Private healthcare accounts for about 4% of the GDP and is growing at about 12-13% a year. The sector is poised for a faster growth and needs more investments. The government���s decision comes at a time when the healthcare industry, particularly smaller players, are getting more structured, making them more credit worthy,��� said Vishal Bali, CEO of Wockhardt Hospitals.
Borrowers have to necessarily take the Reserve Bank of India���s (RBI) approval. Borrowing under the automatic route, a facility available to infrastructure companies and companies other than banks, however, has not been extended to the service sector companies.
Industrial and infrastructure companies are allowed to borrow abroad for overseas direct investment in joint venture and wholly-owned subsidiaries too. This end-use of debt raised abroad is also not allowed for services sector as per the finance ministry statement issued on Saturday.
The government now recognises that as in the case of industrial sector, the services sector should also be allowed to borrow abroad to meet the needs of an economy racing at 9% a year and predicted to grow at 8.5% this fiscal.
���Hospitality, healthcare and IT are fast growing sectors. Private healthcare accounts for about 4% of the GDP and is growing at about 12-13% a year. The sector is poised for a faster growth and needs more investments. The government���s decision comes at a time when the healthcare industry, particularly smaller players, are getting more structured, making them more credit worthy,��� said Vishal Bali, CEO of Wockhardt Hospitals.
ADVERTISEMENT
| Stories |
���Hundred million dollar is good to begin with and later the government could think of raising it depending on the experience���, said Vishal Bali, CEO of Wockhardt Hospitals. Public and private healthcare together accounts for about 5.2% of the country���s GDP.
���This move will give access to cheaper funds to companies in the services sector. The timing of the move is right as domestic funds have become quite expensive,��� said Anil Ladha, executive vice-president, ICICI Securities. Interest rates at a six-year peak had made borrowing costly for companies, triggering a slowdown in the manufacturing sector and prompting finance minister P Chidambaram to assure of ���corrective steps��� on Friday.
The decision to allow service sector firms to borrow abroad comes two days after the government liberalised ECB norms to allow companies to bring home for rupee expenditure a larger proportion of the debt they raise abroad, and borrow at a rate higher than in the past.
On Thursday, the government made ECB terms more liberal for infrastructure companies than for the rest. Foreign institutional investors (FIIs) were also allowed to invest 70% more cumulatively in government and corporate bonds.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
