Companies looking to global banks for funding

Mumbai: Foreign banks and private credit funds are showing interest in financing acquisitions by Indian companies. Other companies including Torrent Group and Hinduja have approached several foreign banks and private equity firms for their acquisitions. According to JP Morgan estimates, global investors have around Rs. 2 lakh crore fund, of which 100 to 150 billion dollars is earmarked for India. Corporate executives say Indian companies raising capital from abroad for acquisitions would be better off doing so through equity rather than debt.

Corporate finance advisory sources said, 'Even if they have to go for the debt option, a hybrid structure preferring equity, where the interest could be around 6 to 8 per cent, would be appropriate. Normal global lending is burdened by restrictions by the RBI and hence it will be extremely challenging and costly for them as foreign exchange covered interest rates may go up to 11-12 per cent due to higher Fed rates.'

Hinduja Group is also raising $850 million in debt for the acquisition of Reliance Capital. Torrent Group is in talks with global banks to raise $5 billion to buy its rival Cipla. JSW Group is also in talks with banks and private equity funds for acquisitions in India.

Indian companies are raising global capital because Indian banks are not allowed to finance the acquisitions they make. Bankers say that transactions by Indian business houses have declined so far this calendar year, but the outlook for the rest of the financial year is better.

The value of mergers and acquisitions in India fell 69.1 percent to $50.8 billion in the first nine months of calendar year 2023 compared to a year earlier. This weakness in merger-acquisition pricing has been attributed to declining investor sentiment amid rising interest rates and geopolitical uncertainty.