Mumbai: An upgrade in India's rating is expected to make overseas borrowing cheaper for local companies and non-bank lenders, leading to savings of up to 20 basis points for top-rated firms, industry executives said.
One basis point is a hundredth of a percentage point.
Credit ratings agency S&P Global on Thursday upgraded India's long-term unsolicited sovereign credit ratings to "BBB" from "BBB-", citing economic resilience and sustained fiscal consolidation, while maintaining a stable outlook.
"There will be a positive impact of around 10-20 bps after the ratings upgrade. As of today (Thursday), raising money via external commercial borrowings comes to about 7.75% on a blended basis. With benign hedging cost, we are seeing huge scope in this segment," said DS Tripathi, executive vice chairman, Aadhar Housing Finance.
Industry executives said the current ECB borrowings is upwards of 7.2-7.5% on a full-hedged basis for top-rated companies, lower compared to domestic bank loans. One-year marginal cost of borrowing-based lending rate, which is the benchmark for loans to corporate and NBFCs, is upwards of 8.50%.
"With Thursday's upgrade by S&P, non-banking finance industry anchor ratings could shift up and hence companies will also benefit as the global investor base expands for papers from NBFI issuers. With the better rating there may be a spread benefit of 15 to 40 basis points for companies belonging to the non-banking finance industry," said Govind Modani, head of treasury, IIFL Finance.
In FY25, ECB registrations hit a record $61 billion, with NBFCs' share rising to 43%-up from a 20-37% average over the past five years, RBI data shows. ECBs have become a cheaper funding source for NBFCs, helping reduce borrowing costs and diversify their funding mix.
In the local market, surplus liquidity and earlier RBI rate cuts have pushed bond yields lower, making ECBs relatively expensive, experts said. However, since the corporate bond market is dominated by AAA and AA-rated firms, cost advantage of ECBs is confined to top-rated borrowers.
One basis point is a hundredth of a percentage point.
Credit ratings agency S&P Global on Thursday upgraded India's long-term unsolicited sovereign credit ratings to "BBB" from "BBB-", citing economic resilience and sustained fiscal consolidation, while maintaining a stable outlook.
"There will be a positive impact of around 10-20 bps after the ratings upgrade. As of today (Thursday), raising money via external commercial borrowings comes to about 7.75% on a blended basis. With benign hedging cost, we are seeing huge scope in this segment," said DS Tripathi, executive vice chairman, Aadhar Housing Finance.
Industry executives said the current ECB borrowings is upwards of 7.2-7.5% on a full-hedged basis for top-rated companies, lower compared to domestic bank loans. One-year marginal cost of borrowing-based lending rate, which is the benchmark for loans to corporate and NBFCs, is upwards of 8.50%.
"With Thursday's upgrade by S&P, non-banking finance industry anchor ratings could shift up and hence companies will also benefit as the global investor base expands for papers from NBFI issuers. With the better rating there may be a spread benefit of 15 to 40 basis points for companies belonging to the non-banking finance industry," said Govind Modani, head of treasury, IIFL Finance.
In FY25, ECB registrations hit a record $61 billion, with NBFCs' share rising to 43%-up from a 20-37% average over the past five years, RBI data shows. ECBs have become a cheaper funding source for NBFCs, helping reduce borrowing costs and diversify their funding mix.
In the local market, surplus liquidity and earlier RBI rate cuts have pushed bond yields lower, making ECBs relatively expensive, experts said. However, since the corporate bond market is dominated by AAA and AA-rated firms, cost advantage of ECBs is confined to top-rated borrowers.
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